Planning

MARKETING MATERIAL

Marketing Plan Planning Process Corporate Plan Corporate Objectives Non-Profit

Forecasting Exponential Long Term Forecasting Corporate Mission

Corporate Vision Marketing Myopia Marketing Audit Analysis SWOT Analysis

Assumptions Marketing Objectives Emergent Strategy Marketing Strategies

Detailed Plans Plan Structure Contingency Plan Progress Measurement

Performance Analysis Use of Marketing Plans Budget Tools Approaches to Budgeting

Conclusion

9444 MARKETING Chapter 14

- Marketing Planning

Introduction

This final chapter brings together the techniques developed in

the previous chapters: in theory at least, planning is a central

function of marketing.

In the first instance, however, the chapter examines corporate

planning, which sets the context for that of marketing. In

practice the two are very closely related; and, indeed, much of

the theory of corporate strategy is derived from marketing. In

truth, the development of the organization's mission and

objectives largely determines its marketing strategy. Therefore,

the chapter moves from corporate strategic management to

strategic marketing, and thence to marketing planning.

Even so, the first formal stage of marketing planning is an

extensive audit, to collect all the data needed for the

decisions. These are often analysed using the framework of a SWOT

(Strengths, Weaknesses, Opportunities, Threats) analysis.

Whatever the approach, the outcomes will be the various marketing

objectives and strategies. These, in turn, lead to the plans and

programmes described in the marketing plan --the structure of

which is described. The process of tracking performance against

these (targeted) plans is also a final element of the overall

planning process.

All of the methods of forecasting described earlier in the book,

with the possible exception of scenarios, tend to look at

forecasting in isolation, as a science to be unsullied by real

life. But the purpose of forecasting, and subsequently budgeting,

is to provide a basis for planning the future. Thus, the most

useful budgets need to be produced iteratively. They need to take

into account the plans that are being laid (on the basis of the

earlier forecasts).

In this all the factors are taken into account. In particular, it

is assumed that the future may be different. The product

potential is determined, as are the planned actions to maximize

actual sales, and the forecast (or more correctly, in view of the

strictures in the earlier chapter, the `budget') allows for the

predicted outcomes of these. Such a comprehensive approach is

practised rigorously by few companies, although most companies do

eventually temper their forecasts arrived at by other means with

a degree of realism.

AUDIT 15.1

To the best of your knowledge, which of these (or other)

approaches to planning does your organization adopt? How well

does it succeed in producing forecasts that turn out to be almost

correct? Which approach do you think it should use?

The Marketing Plan

The need for planning is now almost universally accepted by

managers; even though it is not so widely implemented in

practice. The use of such plans has a number of benefits, just

some of which may be:

'Consistency'. The individual action plans will then be

consistent with the overall corporate plan; and with the other

departmental/functional plans which should be put in place

elsewhere in the organization. They should also be consistent

with those of previous years, minimizing the risk of management

`fire-fighting'.

'Responsibility'. Those who have responsibility for

implementing the individual parts of the marketing plan will know

what their responsibilities are, and can have their performance

monitored against these.

'Communication'. All those involved in implementing the

plans will also know what the overall objectives are, together

with the assumptions which lie behind them, and what the context

for each of the detailed activities is.

'Commitment'. Assuming that the plans have been agreed with

all those involved in their implementation, as well as with those

who will provide the resources, the plans should stimulate a

group commitment to their implementation.

On the other hand, Bernard Taylor - 1 - says:

Planning is an unnatural process. It is much more fun to

'do' something. To quote John Preston of Boston College: The

nicest thing about not planning is that failure comes as a

complete surprise, and is not preceded by a period of worry and

depression.

As Bernard Taylor is one of the leading theorists in this field,

he does go on to add an all-important footnote:

The truth is that planning has failed many times but planning

specialists, line managers, consultants and academics have

continually modified the process to suit different situations.

There is not one system of planning but many systems, not one

style but many styles, and a planning process must be tailor-made

for a particular firm in a specific set of circumstances.

Plans must be 'specific' --to the organization and to its

current situation.

This last chapter will, therefore, conclude with an examination

of the development of the marketing plan. This brings together

all the activities which have been described in the earlier

chapters of this book.

AUDIT 15.2

Does your organization have a formal marketing plan? If not, why

not?

If so, why? Which of the following reasons --consistency,

responsibility, communication and commitment --apply to its

use?

(Fig. 15.1 near here)

The Planning Process

In most organizations `strategic planning' is an annual process,

typically covering just the year ahead. Occasionally, a few

organizations may look at a practical plan which stretches three

or more years ahead.

To be most effective, the plan has to be formalized, usually in

written form, as a formal `marketing plan'. This is a process

which typically follows a number of distinct steps, here

illustrated by Malcolm McDonald - 2 - (figure 15.1). The

essence of the process is that it moves from the general to the

specific; from the overall objectives of the organization down to

the individual action plan for a part of one marketing programme.

It is also an iterative process, so that the draft output of each

stage is checked to see what impact it has on the earlier stages

--and is amended accordingly.

The Corporate Plan

The starting point for the marketing plan, and the context within

which it is set, is the corporate plan. In most marketing-

oriented organizations the contents of the corporate plan will

closely match those of the marketing plan itself; but it will

also include the plans for the disposition of the other internal

resources of the organization. Thus, the corporate plan is likely

to contain three main components:

The first category is intimately involved with the customers. In

marketing terms, although there are many other factors to take

into account, the most important definition of where the company

'is' revolves around where it is in the market (and hence

where it is with its consumers). The same is largely true of the

second stage as well; since, no matter how much its managers may

wish otherwise, where the company can realistically expect to go

is totally in the hands of its customers. It is only at the third

stage that the 4 Ps come into play as vehicles for moving the

company to reach its objectives.

There are many recommended approaches to such planning. Philip

Kotler, - 6 - for example, shows the process as in figure

15.2.

Corporate Objectives

The overall objectives of commercial organizations are

conventionally supposed to be financial:

John Argenti, - 7 - on the other hand, graphically illustrates

the complex nature of even the simplest approach, looking at the

risk versus performance trade-off that shareholders face (figure

15.3).

However, other aims are also possible. Many companies choose

long-term growth (which may be quite different to revenue

maximization in the short term).

(Fig. 15.2 near here)

Almost all have an implicit, and very powerful, aim of survival

(which J. K. Galbraith spelled out so forcefully in his book

'The Affluent Society'). - 8 -

One of the best known `alternatives', that of `satisficing'

(rather than profit maximization), comes from Herbert

Simon: - 9 -

In one way or another, they [alternative theories] incorporate

the notions of bounded rationality: the need to search for

decision alternatives, the replacement of optimization [profit-

based objectives] by targets and satisficing [minimal] goals, and

mechanisms of learning and adaptation.

Pfeffer and Salancik - 10 - say, on the basis of considerable

research, that:

We prefer to view organizations as coalitions ... altering their

purposes and domains to accommodate new interests, sloughing off

parts of themselves to avoid some interests, and when necessary,

becoming involved in activities far afield from their stated

central purposes. Organizations are social instruments of

tremendous power and energy, and the critical issue becomes who

will control this energy and for what purpose.

If we accept the traditional assumption, as to the financial

basis of the objectives behind the corporate plan, these

objectives are ideally meant to be quantified in numerical and,

in particular, financial terms.

In the most general terms, though, the `objectives' behind a

strategy address two questions: `'Where' do we want to be?'

and `'When' do we expect to be there?'

Objectives for Non-profit-making Organizations

In the case of non-profit organizations the objectives may be

even less clear. Keith Blois - 12 - suggests five main reasons

for the differences from `commercial' organizations:

1. Ambiguous Goals [more actors and groups of actors are

involved]

2. Lack of Agreement in Means-End Relationships [even where there

is consensus on the goal there may be disagreement on how to get

there]

3. Environmental Turbulence [non-profit organizations seem to be

exposed more to turbulence than commercial ones]

4. Unmeasurable Outputs [unfortunately, by definition, non-profit

organizations do not have the classically convenient simplicity

of `bottom-line profit']

5. The Effects of Management Intervention are Unknown [the lack

of precision caused by factors 1-4 is problem enough, but the

`culture' seems to add further barriers to managing these

organizations]

Even so, Kotler and Andreasen - 13 - suggest some possible

objectives for such organizations:

Surplus Maximization [equivalent to profit maximization]

Revenue Maximization [as for profit-making organizations]

Usage Maximization [maximizing the numbers of users and their

usage]

Usage Targeting [matching the capacity available]

Full Cost Recovery [breaking even]

Partial Cost Recovery [minimizing the subsidy]

Budget Maximization [maximizing what is offered]

Producer Satisfaction Maximization [satisfying the wants of

staff]

A final caveat must be that the existence of a clearly defined,

and formally stated, `purpose' may still not explain what the

organization's true objectives are. Based on his research into US

organizations, Charles Warriner - 14 - makes the generally

applicable comment:

Statements of purpose, thus, must be treated as fictions produced

by an organization to account for, explain, or rationalize its

existence to particular audiences rather than as valid and

reliable indicators of purpose.

'It is important that you recognize the complexity which lies

behind corporate objectives, and are not seduced by those who

would argue that simplicity is the order of the day'. Although

the problems may have to be artificially simplified, to make them

easier to handle, this should not blind you to their true nature.

It should also alert you to the fact that, with so many variables

which may be periodically in a state of flux, each new situation

will be unique; and, despite the fact that rules of thumb will

help, 'the solutions must be built anew for each problem'.

AUDIT 15.3

What are the published objectives of your organization? How well

do they reflect the real objectives of the management and staff?

FORECASTING

This is the point at which you are likely to enter into the complicated world of forecasting. This can be, these days, a very complex topic. In the next few pages, therefore, I will limit myself just to guiding you through a small number of the most useful, and most practical, techniques.

Forecasting can, in general, be roughly divided into two parts;

SHORT-TERM FORECASTING - this is the type of forecasting you will recognise. It is normally based upon a projection of historical trends, usually focused on sales volumes. There are many sophisticated techniques, increasingly using large amounts of computing power, but in essence all of these try to separate out the four main components:

Long term trends probably represent the most important information you are trying to extract from the mass of data before you.

Medium term cycles are supposed to result from regular economic ups and downs (from boom to bust) which used to be encapsulated in a 5 year 'business cycle' which, unfortunately, became unpredictable in the 1980s. The much quoted 'Kondratieff Cycles' are much longer, if they exist at all, being of the order of 25 - 50 years; and hence do not normally enter into shorter term forecasts.

Seasonal is the pattern within a single year, a pattern which most suppliers who are affected by it know well.

Random fluctuations, which do not fit regular patterns, afflict all products and services, and make computer analysis a very difficult proposition.

The end result of all these patterns superimposed may appear very confusing indeed.

Despite all the sophistication on offer, by far the best advice is to keep it as simple as possible.

The human eye is much better at resolving the complications shown above than the most powerful computer. Thus, the best approach to forecasting (and certainly the best check on any more sophisticated technique) is 'eyeballing' the sales charts! With some practise you should be able to sort out the main features of what is happening - and that is better than most computer models achieve.

The evidence is that the sophistication adds little or nothing to the accuracy (though it does to the image of the forecasters, and the prices they charge). Worst of all, such unnecessary complexity hinders your understanding of what is going on under the covers of the computer (and hides the fact that most forecasts are really based on human judgement). In any case, even if historical trends are accurately analysed, there is no guarantee that the future will be the same as the past. It is much better that you surface all the assumptions, and make your own judgements in full knowledge of what is involved.

So, I will recommend just two very simple techniques to use (if nothing else but as a check on the forecasts others are trying to sell to you);

EYEBALLING - the technique I mentioned above is the first, and best, method. It merely requires you to plot historical results graphically; and then look for the patterns. Trust your own judgement - until you are proved wrong.

EXPONENTIAL SMOOTHING - this is the mathematical technique which reportedly gives the best results; probably because it is so simple, and consequently easily understood. Indeed, it is a very impressive title for a simple, but useful, mathematical technique; which can quite easily be handled manually. It just allows greater weight to be given to recent periods. Instead of, for example, the average trend over the whole of the last year being calculated, the sales data for each of the months is given a weighting, depending on how recent that month was.

It simply takes the previous forecast, and adds on the latest 'actual' sales figure; except that it does this in a fixed proportion, which is chosen to reflect the weighting to be given to the latest period. The general form is;

Ft+1 = Ft + aEt

where Ft+1 is the new forecast you are calculating, Ft is the previous one and Et is the deviation (or 'error') of the actual performance recorded against that previous period forecast; and 'a' is the weighting to be given to the most recent events.

For example, if a weighting of 0.1 is to be given to the latest figure, then the new forecast will be (Previous Forecast) + (0.1 X Deviation of Last Actual from the Forecast). Note that as the last forecast had in turn been produced by the same process (as had the forecasts over the preceding periods), there is no need to subtract any further figures; since in this way all the earlier sales figures are incorporated (but with 'exponentially' decreasing importance as they recede into the past). Thus, in the example given, the preceding three months are represented to the extent of 9% (0.1 X 0.9), 8% (0.1 X 0.9 X 0.9) and 7% (0.1 X 0.9 X 0.9 X 0.9), and so on. Clearly the higher the proportion of the current month (say 0.3 rather than 0.1) the greater the weighting given to recent periods.

Exponential smoothing will not, in this simple form, allow for seasonality; though more sophisticated (but less easily understood) versions can do this.

LONG-TERM FORECASTING tends to be qualitative (as compared with the quantitative, numeric, focus of short term forecasts). It is even more dependent on judgement; and most of the more complicated approaches to it (such as Delphi, or Jury methods) aim to reduce the risks implicit in the judgement by spreading the process over panels of experts. It does not, in the final analysis, absolve the manager from backing his or her own judgement (which is probably better informed, in terms of the specific situation, than that of the 'experts').

Of all the techniques the most useful involves developing complementary scenarios, which allow for the uncertainties involved; as well as expanding the viewpoint of all the managers involved in the process. Unfortunately, in the form most often described it can also be the most complex and sophisticated of these techniques - and in this form perhaps only the very large corporate planning team at Shell have used it really effectively. A much simplified approach, based on the version which Shell recommend for their line managers who are not part of their corporate planning group, is more practical for most organisations. In this simplified version of the form orginally described by Shell[1] the four steps to this process are:

1) Identify the important variables

2) Brainstorm to find the possible outcomes

3) Link these together in a series of alternative scenarios

4) Refine these scenarios

1) Identify the important variables - what (in the whole of the external environment, not just the marketing environment) are the most important factors which will determine the future of the organisation.

2) Brainstorm to find the possible outcomes - work through the different outcomes which different alternatives for these variables may lead to.

3) Link these together in a series of alternative scenarios - start to build six or seven scenarios ('stories' about the future of the organisation, or more importantly its market) which are able to contain these different alternatives.

4) Refine these scenarios - then work on the scenarios until they are condensed to two or three meaningful alternative (but complementary) descriptions of the future.

Corporate Mission

Behind the corporate objectives, which in themselves offer the

main context for the marketing plan, will lie the `'corporate

mission''; which in turn provides the context for these

corporate objectives. This `corporate mission' can be thought of

as a definition of what the organization is; of what it does:

`Our business is ...'.

This definition should not be too narrow, or it will constrict

the development of the organization; a too rigorous concentration

on the view that `We are in the business of making meat-scales',

as IBM was during the early 1900s, might have limited its

subsequent development into other areas. On the other hand, it

should not be too wide or it will become meaningless; `We want to

make a profit' is not too helpful in developing specific plans.

Abell - 15 - suggests that the definition should cover three

dimensions: 'customer groups' to be served, 'customer

needs' to be served, and 'technologies' to be utilized.

Thus, the definition of IBM's `corporate mission' in the 1940s

might well have been: `We are in the business of handling

accounting information [customer need] for the larger US

organizations [customer group] by means of punched cards

[technology].' Fortunately, as the name itself (International

Business Machines) indicates, IBM already had a wider perspective

(and its corporate mission was virtually defined by its name).

AUDIT 15.4

What is your organization's corporate mission?

(If your organization has not spelled out its corporate mission,

you should make your own judgement as to what this should be. If

you have followed the marketing audits through the book, you

should by now have a good idea of what this might be.)

Corporate Vision

Perhaps the most important factor in successful marketing is the

`corporate vision'. Surprisingly, it is largely neglected by

marketing textbooks; although not by the popular exponents of

corporate strategy --indeed, it was perhaps the main theme of

the book by Peters and Waterman, - 16 - in the form of their

`Superordinate Goals'. Theodore Levitt - 17 - says: `Nothing

drives progress like the imagination. The idea precedes the

deed.' Even Robert Townsend - 18 - echoes the statement in his

comment that: `Things get done in our society because of a man or

woman with conviction.'

If the organization in general, and its chief executive in

particular, has a strong vision of where its future lies, then

there is a good chance that the organization will achieve a

strong position in its markets (and attain that future). This

will be not least because its strategies will be consistent; and

will be supported by its staff at all levels. In this context,

all of IBM's marketing activities are underpinned by its

philosophy of `customer service'; a vision originally promoted by

the charismatic Watson dynasty. Similarly, `at Matsushita it

means never cheating a customer by knowingly producing or selling

defective merchandise'. - 19 -

Henry Mintzberg - 20 - explains:

... in some cases, in addition to the mission there is the `sense

of mission', that is, a feeling that the group has banded

together to create something new and exciting. This is common in

new organizations.

What a worthwhile vision consists of is, however, usually open to

debate; hence the reason why such visions tend to be associated

with strong, charismatic leaders. But the vision must be

relevant. Robert Townsend, - 21 - again, adds the very

pragmatic footnote:

Before you commit yourself to a new effort, it's worth asking

yourself a couple of questions: Are we really trying to do

something worthwhile here? Or are we just building another

monument to some diseased ego?

The problem for marketers is also that this vision is often

unrelated to the markets. IBM and Matsushita are fortunate, in as

much as their creeds are of general applicability; of almost

religious fervour. In other organizations, Alan Sugar's

concentration on putting together cheap electronic packages and

Clive Sinclair's flair for identifying innovative technologies,

for example, have much narrower scope of vision; and may only be

successful while they approximate to market needs. The vision

will move from being a major advantage to being an overwhelming

disadvantage if the market shifts. As Peter Drucker - 22 -

says, `Every "right" product sooner or later becomes a "wrong"

product.' This theme was explored in more detail in the section

on `Conviction marketing' in chapter 11.

The message for the marketer is that, to be most effective, the

marketing strategies must be converted into a powerful long-term

vision; if such a vision does not already exist. Peter

Drucker, - 23 - once again, says:

In many markets one prospers only at the extremes: either as one

of the few market leaders who set the standard, or as a

specialist... . What is not tenable is a strategy in between.

Hickman and Silva - 24 - put it more simply:

Visionary executives not only position their organisations to

make the most of impending changes, they attempt to influence

those changes by causing rather then merely reacting to them.

Such vision, however, demands the extraordinary. As Peter

Drucker - 25 - has said:

To make the future demands courage. It demands work. But it also

demands faith ...

must be uncertain; no one can really say as yet what it will look

like if and when it becomes a reality. It must be risky; it has a

probability of success, but also of failure.

Marketing Myopia

In his very influential article, - 26 - Theodore Levitt stated

that:

The viewpoint that an industry is a customer-satisfying process,

not a goods-producing process, is vital for all businessmen to

understand. An industry begins with the customer and his needs,

not with a patent, a raw material, or a selling skill. Given the

customer's needs the industry develops backwards, first

concerning itself with the physical 'delivery' of customer

satisfactions. Then it moves back further to 'creating' the

things by which these satisfactions are in part achieved. How

these materials are created is a matter of indifference to the

customer, hence the particular form of manufacturing, processing,

or what-have-you cannot be considered as a vital aspect of the

marketing.

His reason for this emphasis, supported by considerable anecdotal

evidence in the rest of the article, was that most organizations

defined their business perspectives (now often referred to as

`corporate missions') too narrowly; typically on the basis of the

technological processes that they employed (but, at best, upon

internal factors). His view, which was enthusiastically seized

upon by the more adventurous organizations, was that the link

with the consumer, the `customer franchise', was the most

important element.

Adopting a wider perspective has helped many organizations to

appreciate better how they could develop. Some organizations,

however, have taken the process very literally. Holiday Inns, for

example, decided that it was not in the `hotel business' but in

the `travel industry', and acquired a number of businesses,

including a bus company. However, it soon learned that its

management skills were not in those areas; and divested itself of

them, retrenching to the business it knew best.

Indeed, it is worth noting that such merger and acquisition

activities must be considered as viable alternatives to

traditional marketing developments. Rowe 'et al'. - 27 -

provide a useful list of the available alternatives (table

15.1).

On the other hand, Levitt - 28 - himself recognized the danger

of the possible over-reactions in his later book, where he added

the comment:

Marketing Myopia was not intended as analysis or even

prescription; it was intended as manifesto. It did not pretend to

take a balanced position ... . My scheme, however, tied marketing

more closely to the inner orbit of business policy.

The last sentence seems, at least to me, to be the best comment

on the true importance of his contribution. But, as a footnote, I

will also add Henry Mintzberg's - 29 - observation that:

Managing strategy is mostly managing stability, not change.

Indeed, most of the time senior managers should not be

formulating strategy at all; they should be getting on with

making their organizations as effective as possible in pursuing

strategies they already have.

Table 15.1 Strategic alternatives

'Strategic alternative'<>'Focus'<>'External or

internal'<>'Purpose or function'

0. Status quo<>Stability<>Internal<>Continue in present

products/markets temporarily or permanently, depending on product

life-cycle

1. Concentration<>Single product line<>Internal<>Do one thing

well

2. Horizontal integration<>Ownership or control of

competitors<>External<>Gain market power and economies of

scale

3. Vertical integration<>Transformation of cost centre to profit

centre<>External<>Improve economies of scale; reduce dependence

on suppliers or distributors

4. Diversification<>Broadening of product line<>External or

internal<>Reduce competitive pressures; gain greater

profitability; spread risk

5. Joint ventures<>Complementary benefits<>External<>Spread

risk; bring about synergy

6. Retrenchment<>Reduction of activity or

operations<>Internal<>Temporarily respond to adversity by

permanent phase-out

7. Divestiture<>Removal of entity that does not

fit<>Internal<>Realign products/markets or organization

8. Liquidation<>Same as item 7<>Internal<>Same as item 7;

situation is usually more severe

9. Innovation<>Seizing of leadership position<>Internal<>Take

initiative; gain position early in product life-cycle

10. Restructuring<>Cost reduction, growth

potential<>External<>Concentrate on products and divisions with

high potential

Marketing Audit

The first formal step in the marketing planning process is that

of conducting the marketing audit. Ideally, at the time of

producing the marketing plan, this should only involve bringing

together the source material which has already been collected

throughout the year --as part of the normal work of the

marketing department.

Kotler 'et al'. - 30 - define it at length:

A marketing audit is a 'comprehensive, systematic,

independent' and 'periodic' examination of a company's --

or business unit's --marketing environment, objectives,

strategies, and activities with a view to determining problem

areas and opportunities and recommending a plan of action to

improve the company's marketing performance.

Indeed, that is exactly what you have been doing as you have

worked your way through this book. By now you should have amassed

a reasonable amount of data about your organization and its

environment. This is the basis of your own `marketing audit'.

This process should have demonstrated an important truth. While

some organizations have successfully employed external

consultants to conduct such audits, generally speaking they are

best undertaken by the management who `own' the marketing

process. This is partly because they are the best people to

understand the subtleties of the information revealed (always

assuming that they have managed to cast aside their

preconceptions and prejudices). Even more importantly, though,

the audit is the best possible learning process for these

managers; introducing them to the factors which are most

important to their management of marketing. Finally, and most

importantly of all, it ensures that those who will have to

implement the results of the planning process understand, and are

committed to, the assumptions which lie behind it.

As explained in the earlier section on desk research, this

material will have been best organized as a 'facts book' or

`facts library'. As such, it will have been organized so that

facts pertaining to any issue can easily and rapidly be

extracted. As part of this process, a degree of analysis may well

have already begun, as key elements are highlighted.

'The emphasis at this stage is on obtaining a complete and

accurate picture'. In a single organization, however, it is

likely that only a few aspects will be sufficiently important to

have any significant impact on the marketing plan; but all may

need to be reviewed to determine just which 'are' the few.

In this context some factors related to the customer, which

should be included in the material collected for the audit, may

be:

Who are the customers?

--What are their key characteristics?

--What differentiates them from other members of the

population?

What are their needs and wants?

--What do they expect the `product' to do?

--What are their special requirements and perceptions?

What do they think of the organization and its products or

services?

--What are their attitudes?

--What are their buying intentions?

A `traditional' --albeit product-based --format for a `brand

reference book' (or, indeed, a `marketing facts book') is

suggested by Godley: - 31 -

1. Financial data --Facts for this section will come from

management accounting, costing and finance sections.

2. Product data --From production, research and development.

3. Sales and distribution data --Sales, packaging, distribution

sections.

4. Advertising, sales promotion, merchandising data --

Information from these departments.

5. Market data and miscellany --From market research, who would

in most cases act as a source for this information.

His sources of data, however, assume the resources of a very

large organization. In most organizations they would be obtained

from a much smaller set of people (and not a few of them would be

generated by the marketing manager alone).

It is apparent that a marketing audit can be a complex process,

but the aim is simple: 'it is only to identify those existing

(external and internal) factors which will have a significant

impact on the future plans of the company'.

It is clear that the basic material to be input to the marketing

audit should be comprehensive. Accordingly, as suggested earlier,

the best approach is to accumulate this material continuously, as

and when it becomes available; since this avoids the otherwise

heavy workload involved in collecting it as part of the regular,

typically annual, planning process itself --when time is usually

at a premium. Even so, the first task of this `annual' process

should be to check that the material held in the current `facts

book' or `facts files' actually 'is' comprehensive and

accurate, and can form a sound basis for the marketing audit

itself.

The structure of the facts book will be designed to match the

specific needs of the organization, but one simple format --

suggested by Malcolm McDonald --may be applicable in many cases.

This splits the material into three groups:

1 'Review of the marketing environment'. A study of the

organization's markets, customers, competitors and the overall

economic, political, cultural and technical environment; covering

developing trends, as well as the current situation.

2 'Review of the detailed marketing activity'. A study of

the company's marketing m)x; in terms of the 4 Ps --product,

price, promotion and place.

3 'Review of the marketing system'. A study of the marketing

organization, marketing research systems and the current

marketing objectives and strategies.

The last of these is too frequently ignored. The marketing system

itself needs to be regularly questioned, because the validity of

the whole marketing plan is reliant upon the accuracy of the

input from this system, and `garbage in, garbage out' applies

with a vengeance.

To these, Kotler 'et al'. - 32 - add two further (more

`bureaucratic', but nevertheless important) audits: a marketing

productivity audit, to see where marketing costs could be

reduced; and a marketing function audit, to identify weaknesses.

AUDIT 15.5

At this stage you should, at long last, bring all the previous

material (in what has now become your own personal `facts book')

together to produce your formally analysed marketing audit; which

answers the various questions listed in the sections above.

Analysis

The analysis of this material will, no doubt, require significant

effort. In the first instance it is a matter of selection, of

sorting the wheat from the chaff. What is important, and will

need to be taken into account in the marketing plan that will

eventually emerge from the overall process, will be different for

each product or service in each situation. One of the most

important skills to be learned in marketing is that of being able

to concentrate on just what is important.

In the case of Compaq, it was an awareness of a gap in the

market. In the case of Amstrad, it was an appreciation of

competitive pricing structures. In the case of IBM, it was an

understanding of the overall environmental factors. Each of these

companies, with broadly similar products and operating in the

same market, probably asked very different questions of their

respective marketing audits.

In addition, all the analytical techniques which were described

in the earlier chapters can be applied, and should be applied

where relevant. It is important to say not just what happened but

why. The process of marketing planning encompasses all of the

marketing skills. However, a number of these may be particularly

relevant at this stage:

'Positioning'. As already stated in the earlier chapter, the

starting point of the marketing plan must be the consumer. It is

a matter of definition that his or her needs should drive the

whole marketing process. The techniques of positioning and

segmentation therefore usually offer the best starting point for

what has to be achieved by the whole planning process.

'Portfolio planning'. In addition, the coordinated planning

of the individual products and services can contribute towards

the balanced portfolio. Malcolm McDonald - 33 - suggests a very

useful pictorial device which summarizes this information (figure

15.4). On this diagram, the 'segments' the organization is

operating in are plotted; with the value (to the organization) of

each plotted on the 'y'-axis and the strength of the

organization in that segment along the 'x'-axis. In this

example the size of the solid circles shows the relative amount

of the organization's total turnover that they represent. The

dotted circles, on the other hand, show where the organization

wants to be (including the volume) in three years' time.

'80:20 rule'. To achieve the maximum impact, the marketing

plan must be clear, concise and simple. It needs to concentrate

on the 20 per cent of products or services, and on the 20 per

cent of customers, which will account for 80 per cent of the

volume and 80 per cent of the `profit'.

'4 Ps'. As we have seen, the 4 Ps can sometimes divert

attention from the customer, but the framework they offer can be

very useful in building the action plans.

SWOT Analysis

One technique not previously mentioned, but which is particularly

useful in the analysis of the material contained in the marketing

audit, is that of a SWOT (Strengths, Weaknesses, Opportunities,

Threats) analysis. Typically seen by managers as being the most useful planning tool of all[2], it groups some of the key pieces of

information into two main categories (internal factors and

external factors) and then by their dual positive and negative

aspects (Strengths and Opportunities, as the former aspects, with

Weaknesses and Threats representing the latter):

'Internal factors. Strengths' and 'weaknesses' internal

to the organization, its strategies and its position in relation

to its competitors.

'External factors. Opportunities' and 'threats'

presented by the external environment and the competition.

The internal factors which may be viewed as strengths or

weaknesses depending upon their impact on the organization's

positions (for they may represent a strength for one organization

but a weakness, in relative terms, for another), may include all

of the 4 Ps; as well as personnel, finance and so on. The

external factors, which again may be threats to one organization

while they offer opportunities to another, may include matters

such as technological change, legislation, sociocultural changes

and so on, as well as changes in the marketplace or competitive

position.

The technique is often presented in the form of a matrix:

(Fig 15.5 near here)

However, the flowchart of Lusch and Lusch - 34 - shows the

relationships rather better (figure 15.5). You should note,

however, that SWOT is just 'one' aid to categorization. It

is not, as many organizations seem to think, the only technique.

It also has its own weaknesses. It tends to persuade companies to

compile lists rather than think about what is really important to

their business. It also presents the resulting lists

uncritically, without clear prioritization; so that, for example,

weak opportunities may appear to balance strong threats.

The aim of any SWOT analysis should be to isolate the key

'issues' that will be important to the future of the

organization; and that subsequent marketing planning will

address.

Assumptions

It is essential to spell out assumptions. However, most companies

do not even realize that they make such assumptions. IBM's key

product marketing document was titled `Forecast Assumptions'; and

the agreement on what the assumptions are if often the key to

understanding the marketing plan.

'You should, however, make as few assumptions as possible; and

very carefully explain those you do make'.

As an extension to this process, when you estimate the results

expected from your strategies, you should also explore a range of

alternative assumptions, in the same way that it was earlier

suggested that there might be a range of forecasts, each meeting

different needs. For example, if you have assumed that the market

will grow by 'x' per cent, you might estimate sales from

your chosen strategy at <156>'y'. However, you should also

estimate sales at lower and higher rates of growth in the market

(`At rate of growth of 'x' -2 per cent, sales will be

'y' -3. At a growth rate of 'x' + 2 per cent

...').

The most useful component of this part of the exercise may well

be a `sensitivity analysis'; since this determines which factors

have the most influence over the outcomes --and hence which

factors should be most carefully managed.

AUDIT 15.6

Draw up a SWOT analysis for your organization. What assumptions

are implicit in this?

Marketing Objectives

Although considerable coverage has, justifiably, been given to

the preceding stages of the marketing audit, you should note that

(with the results of that audit available) 'it is only at this

stage (of deciding the marketing objectives) that the active part

of the marketing planning process begins'.

This next stage in marketing planning is indeed the key to the

whole marketing process. The marketing objectives state just

where the company intends to be; at some specific time in the

future. James Quinn - 35 - succinctly defines objectives in

general as:

Goals (or objectives) state 'what' is to be achieved and

'when' results are to be accomplished, but they do not state

'how' the results are to be achieved.

They typically relate to what products (or services) will be

where in what markets (and must be realistically based on

customer behaviour in those markets). They are essentially about

the match between those 'products' and 'markets'.

Objectives for pricing, distribution, advertising and so on are

at a lower level, and should not be confused with marketing

objectives. They are part of the marketing strategy needed to

achieve marketing objectives.

To be most effective, objectives should be capable of measurement

and therefore 'quantifiable'. This measurement may be in

terms of sales volume, money value, market share, percentage

penetration of distribution outlets and so on. An example of such

a measurable marketing objective might be `to enter the market

with product Y and capture 10 per cent of the market by value

within one year'. As it is quantified it can, within limits, be

unequivocally monitored; and corrective action taken as

necessary.

The marketing objectives must usually be based, above all, on the

organization's financial objectives; converting these financial

measurements into the related marketing measurements.

It is conventionally assumed that marketing objectives will be

designed to maximize volume or profit (or to optimize the

utilization of resources in the non-profit sector), by creating

demand or rejuvenating existing demand, say; although the various

sub-objectives may indicate many different routes to achieving

such optimization. However, as Kotler - 36 - suggested (in the

earlier edition of his book), there may be a number of other

objectives:

Synchromarketing

Demarketing

Counter-marketing

'Synchromarketing'. The aim may be to `redistribute'

existing sales (which are already at optimum levels) so that they

occur at times, or in places, which the supplier prefers. Thus,

for example, organizations which have highly seasonal sales

(which make inefficient use of resources) may want to increase

non-seasonal sales. Walls achieved this by balancing its summer

sales of ice-cream with pies and sausages, demand for which peaks

in winter. The suppliers of central-heating oil offer special

deals for those customers willing to restock their tanks in

summer.

'Demarketing'. Demand may sometimes exceed supply. In these

circumstances the emphasis will be on rationing scarce supplies.

Occasionally the supplier, rather than bring on-stream expensive

new plant, may seek to persuade customers to buy less (or be less

dissatisfied with the scarcity). Some suppliers of electrical

energy (electricity generators in Europe and the USA) have

heavily advertised energy conservation measures to achieve this

end (otherwise, the cost of meeting the peak winter loads would

be very high --and unprofitable).

'Counter-marketing'. In what is usually a public-sector

activity (but is occasionally undertaken by the private sector,

where some uses of a product are damaging the corporate image),

there may be an objective of stopping consumption completely. The

anti-tobacco and anti-drug campaigns are the most obvious

examples; but McDonald's campaigns to stop its customers dropping

litter, or the brewers' campaigns to stop drinking and driving,

fall into this category.

AUDIT 15.7

What are your organization's marketing objectives?

How do you think they should be changed? What practical effect

would these changes have?

EMERGENT STRATEGY

Indeed, incrementalism may go even further. This is most clearly illustrated by a diagram;

This diagram very clearly shows how the intended strategy, decided upon traditionally or incrementally, is overtaken by events in two main ways. One, which will probably be recognised by the organisation is that of unrealised strategy, where it proves impossible to implement the chosen strategy in practice.

Less obvious is the emergent strategy which is decided by events in the external environment; and, thus, forced upon the organisation. This may not necessarily be recognised, in its totality, by the organisation - since many of its implications may be hidden. As markets become more complex, however, such emergent strategies are becoming more common.

Many organisations see both these processes in terms of failure - they have been forced, usually by unpredictable events, to abandon their own strategy. There is, accordingly, a tendency for these unwelcome facts to be ignored until they are so obvious that they cannot be avoided. This is a major error. Such deviations must be recognised (probably through one or other form of environmental analysis coupled with networking) as soon as possible- so that the organisation can react in good time.

A much more powerful approach is, though, to be proactive; so seize upon these deviations as the basis for future developments. What needs to be recognised is that emergent strategies are the most powerful of all. They must, by definition, be dierctly derived from the needs of the market - where even successful deliberate strategies may not ideally match market needs but may achieve their targets by sheer force (especially where conviction marketing lies behind them). Emergent strategies are, thus, likely to be vigorous ones.

There are two main approaches to capitalising on such emergent strategies. The first of these, favoured in the West, is the umbrella strategy. This is a form of very positive delegation, in that the overall strategies, the umbrella, are very general in nature - and allow the lower level managers, who are closest to the external environment, the freedom to react to these changes.

A much more direct, and hence even more powerful, approach is that favoured by the Japanese corporations. they integrate emergent strategies with their own. Indeed it is arguable that, in terms of marketing, to a large extent they use emergent strategies instead of their own deliberate strategies. This is evidenced as much by an attitude of mind as by any other feature. They deliberately go out to look for symptoms of such emergent trends which can be detected in the performance of their own products. More than that, though, they often deliberately launch a range of products rather than a single one to see which is most successful. It is almost as if they deliberately seek out the emergent strategies by offering the best environment for them to develop - the very reverse of the Western approach which seeks to avoid them! The Japanese then go on to build on these emergent strategies with a number of very effective tools - most of which are designed to overcome the major problem which accompanies emergent strategies, that they emerge on the scene much later than deliberate ones (and are likely to be visible to all the competitors at the same time) so that time is the essence. Thus, time management techniques (including parallel development along with flexible manufacturing and JIT) which have been developed by the Japanese offer them a significant competitive advantage in handling such emergent strategies.

Marketing Strategies

There are numerous definitions of what strategy is, but again

James Quinn - 37 - gives a succinct general definition:

A strategy is a 'pattern' or 'plan' that

'integrates' an organization's 'major' goals, policies

and action sequences into a 'cohesive' whole.

He goes on to explain his view of the role of `policies', with

which strategy is most often confused:

Policies are rules or guidelines that express the 'limits'

within which action should occur.

Even then, his co-editor in anot(er handbook, Henry

Minzberg, - 38 - adds:

Human nature is such that we tend to insist on a definition for

every concept. But perhaps we fool ourselves, pretending that

concepts such as strategy can be reduced to a single definition

... Let us, therefore, propose five formal definitions of

strategy --as plan, ploy, pattern, position and perspective ...

Simplifying somewhat, therefore, marketing strategies can be seen

as the means, or `game plan', by which marketing objectives will

be achieved and, in the framework that we have chosen to use, are

generally concerned with the 4 Ps. Examples are:

product

--developing new products, repositioning or relaunching existing

ones and scrapping old ones

--adding new features and benefits

--balancing product portfolios

--changing the design or packaging

price

--setting the price to skim or to penetrate

--pricing for different market segments

--deciding how to meet competitive pricing

promotion

--specifying the advertising platform and media

--deciding the public relations brief

--organizing the salesforce to cover new products and services

or markets

place

--choosing the channels

--deciding levels of customer service

In principle, these strategies describe how the objectives will

be achieved. The 4 Ps are a useful framework for deciding how the

company's resources will be manipulated (strategically) to

achieve the objectives. 'It should be noted, however, that they

are not the only framework, and may divert attention from the

real issues. The focus of the strategies must be the objectives

to be achieved --not the process of planning itself'. Only if

it fits the needs of these objectives should you choose, as we

have done, to use the framework of the 4 Ps.

The strategy statement can take the form of a purely verbal

description of the strategic options which have been chosen.

Alternatively, and perhaps more positively, it might include a

structured list of the major options chosen.

One aspect of strategy which is often overlooked is that of

'timing'. Exactly when it is the best time for each element

of the strategy to be implemented is often critical. Taking the

right action at the wrong time can sometimes be almost as bad as

taking the wrong action at the right time. Timing is, therefore,

an essential part of any plan; and should normally appear as a

schedule of planned activities.

Having completed this crucial stage of the planning process, you

will need to re-check the feasibility of your objectives and

strategies in terms of the

market share, sales, costs, profits and so on which these demand

in practice. As in the rest of the marketing discipline, you will

need to employ judgement, experience, market research or anything

else which helps you to look at your conclusions from all

possible angles.

AUDIT 15.8

Using the above format, detail your organization's marketing

strategies.

Review them critically. Are they realistic? Do they reflect what

really needs to be done?

Detailed Plans and Programmes

At this stage, you will need to develop your overall marketing

strategies into detailed plans and programmes. Although these

detailed plans may cover each of the 4 Ps, the focus will vary,

depending upon your organization's specific strategies. A

product-orientated company will focus its plans for the 4 Ps

around each of its products. A market or geographically

orientated company will concentrate on each market or

geographical area. Each will base its plans upon the detailed

needs of its customers, and on the strategies chosen to satisfy

these needs.

Again, the most important element is, indeed, that of the

detailed plans; which spell out exactly what programmes and

individual activities will take place over the period of the plan

(usually over the next year). Without these specified --and

preferably quantified --activities the plan cannot be monitored,

even in terms of success in meeting its objectives.

It is these programmes and activities which will then constitute

the `marketing' of the organization over the period. As a result,

these detailed marketing programmes are the most important,

practical outcome of the whole planning process. These plans

should therefore be:

'Clear'. They should be an unambiguous statement of

'exactly' what is to be done.

'Quantified'. The predicted outcome of each activity should

be, as far as possible, quantified; so that its performance can

be monitored.

'Focused'. The temptation to proliferate activities beyond

the numbers which can be realistically controlled should be

avoided. The 80:20 Rule applies in this context too. Bonoma and

Crittenden, - 41 - reporting the results of their research into

marketing implementation, noted: `The number of marketing

programs in a firm, compared to relevant competitors, will be

inversely related to the quality of marketing practices

observed.'

'Realistic'. They should be achievable.

'Agreed'. Those who are to implement them should be

committed to them, and agree that they are achievable.

The resulting plans should become a working document which will

guide the campaigns taking place throughout the organization over

the period of the plan. If the marketing plan is to work, every

exception to it (throughout the year) must be questioned; and the

lessons learned, to be incorporated in the next year's plan.

'It is at this stage that all the various elements of the plan

--from Objectives leading to Strategies leading to Detailed

Plans --are finally brought together'.

Once again, Malcolm McDonald - 42 - provides a diagram which

very clearly shows the major activities involved in the process

(figure 15.6). Although at first glance this looks complex, it is

in fact a very functional flowchart of the whole planning

process, and nicely illustrates the relationships between the

various components.

(Fig 15.6 near here)

Marketing Plan Structure

The marketing plan itself should, of course, be formalized as a

written document; although, in practice, too few companies take

this stage seriously enough. The shape that this document takes

will depend upon the 'exact' requirements of the business,

but it might contain the following sections:

'Executive summary'. A short summary of the proposed plan,

partly to provide the perspective for the rest and partly as a

quick reference.

'Marketing audit summary'. A 'brief' summary of the

very detailed marketing audit which will have taken place. If it

is necessary for management to understand the complexities of the

information uncovered in the audit, this should be accomplished

in a previous, separate, document.

'Audit (SWOT) analysis'. Again this must be 'brief',

and should concentrate on the few critical 'issues' which

are addressed by the strategies and plans which come later in the

document.

'Marketing objectives' --in as much detail as is needed.

'Marketing strategy' --again in as much detail as is

necessary to convey this most important element of the plan.

'Action programmes'. The plans themselves, stating `what

will be done', `who will do it', `when it will be done' and `how

much it will cost'.

Malcolm McDonald - 44 - suggests a rather more specific layout,

with rather more emphasis on the analytical elements, which the

simple approach recommended above assumes will already have been

largely covered by preceding documents:

1 Mission statement

2 Summary of performance (to date, including reasons for good or

bad performance)

3 Summary of financial projections (for three years)

4 Market overview

5 SWOT analyses of major projects/markets

6 Portfolio summary (a summary of SWOTs)

7 Assumptions

8 Setting objectives

9 Financial projections for three years (in detail)

More importantly, he deliberately separates this three-year

strategic marketing plan (sometimes just called the `strategy')

from the one-year operating plan (often what is called the

`marketing plan' itself), which is derived from the strategic

plan (but only after this has been approved).

His suggested format for this one-year plan includes:

1 Summary of strategic plan (including overall objectives --in

numeric terms --and overall strategies)

2 Resulting annual strategies (including sub-objectives --

relating to specific products/markets/segments/customers --and

strategies --the means by which these will be achieved through

actions/tactics)

3 Summary of marketing activities and costs

4 Contingency plans

5 Operating results and financial ratios

6 Key activity planner

It can be seen from this list that the short-term (one-year) plan

should concentrate on very specific and quantifiable actions.

Indeed, he provides a very useful set of `forms' which can be

filled in to create most of this plan.

Contingency plan

Perhaps Malcolm McDonald's - 45 - most interesting suggestion,

and the one which is least often allowed for, is the `contingency

plan'. Few marketing plans ever are implemented exactly as

intended: the marketing environment is a particularly uncertain

one, so that it is essential to have full back-up plans to cover

for the eventuality that some of the assumptions are proved

incorrect. He suggests that the following questions are answered

for each assumption, again in the form of a table:

Basis of Assumption

What event would have to happen to make this strategy

unattractive?

Risk of such an event occurring (% or high/low etc.)

Impact if event occurs

Trigger point for action

Actual contingency action proposed

AUDIT 15.9

This is the culmination of all the practical work associated with

this book. The instruction is also one of the shortest --

'produce the marketing plan'.

(Marketing plans can be quite extensive. In general, however, the

longer they are the less effective they will be. The best advice

is, therefore, to keep yours as short as possible (preferably

fewer than five typed pages of A4). The strength of any marketing

plan lies in the strategies and plans it contains; the simpler

the concepts that these embody the more likely they are to be

carried out.)

Measurement of Progress

The final stage is to establish targets (or standards) against

which progress can be monitored. Accordingly, it is important to

put both quantities and timescales into the marketing objectives

(for example, to capture 20 per cent by value of the market

within two years) and into the corresponding strategies.

As was stated in the section on forecasting, changes in the

environment mean that the forecasts often have to be changed.

Along with these, the related plans may well also need to be

changed. Continuous monitoring of performance, against

predetermined targets, represents a most important aspect of

this. However, perhaps even more important is the enforced

discipline of a regular formal review. Again, as with forecasts,

in many cases the best (most realistic) planning cycle will

revolve around a quarterly review. Best of all, at least in terms

of the quantifiable aspects of the plans, if not the wealth of

backing detail, is probably a quarterly rolling review --

planning one full year ahead each new quarter. Of course, this

does absorb more planning resource; but it also ensures that the

plans embody the latest information, and --with attention

focused on them so regularly --forces both the plans and their

implementation to be realistic.

'Plans only have validity if they are actually used to control

the progress of a company: their success lies in their

implementation, not in the writing'.

Performance analysis

The most important elements of marketing performance, which are

normally tracked, are:

'Sales analysis'

Most organizations track their sales results; or, in non-profit

organizations for example, the number of clients. The more

sophisticated track them in terms of 'sales variance' --the

deviation from the target figures --which allows a more

immediate picture of deviations to become evident. `Micro-

analysis', which is a nicely pseudo-scientific term for the

normal management process of investigating detailed problems,

then investigates the individual elements (individual products,

sales territories, customers and so on) which are failing to meet

targets.

'Market share analysis'

Relatively few organizations, however, track their market share.

In some circumstances this may well be a much more important

measure. Sales may still be increasing, in an expanding market,

while share is actually decreasing --boding ill for future sales

when the market eventually starts to drop. Where such market

share is tracked, there may be a number of aspects which will be

followed:

overall market share

segment share --that in the specific, targeted segment

relative share --in relation to the market leaders

'Expense analysis'

The key ratio to watch in this area is usually the `marketing

expense to sales ratio'; although this may be broken down into

other elements (advertising to sales, sales administration to

sales, and so on).

'Financial analysis'

The `bottom line' of marketing activities should, at least in

theory, be the net profit (for all except non-profit

organizations, where the comparable emphasis may be on remaining

within budgeted costs). There are a number of separate

performance figures and key ratios which need to be tracked:

gross contribution<>net profit

gross profit<>return on investment

net contribution<>profit on sales

There can be considerable benefit in comparing these figures with

those achieved by other organizations (especially those in the

same industry); using, for instance, the figures which can be

obtained (in the UK) from `The Centre for Interfirm Comparison'.

The most sophisticated use of this approach, however, is

typically by those making use of PIMS (Profit Impact of

Management Strategies), initiated by the General Electric Company

and then developed by Harvard Business School, but now run by the

Strategic Planning Institute. This covers nearly 3000 Strategic

Business Units (SBUs) across North America and Europe.

The above performance analyses concentrate on the quantitative

measures which are directly related to short-term performance.

But there are a number of indirect measures, essentially tracking

customer attitudes, which can also indicate the organization's

performance in terms of its longer-term marketing strengths and

may accordingly be even more important indicators. Some useful

measures are:

market research --including customer panels (which are used to

track changes over time)

lost business --the orders which were lost because, for example,

the stock was not available or the product did not meet the

customer's exact requirements

customer complaints --how many customers complain about the

products or services, or the organization itself, and about what

Use of Marketing Plans

As I have stressed, a formal, written marketing plan is

essential; in that it provides an unambiguous reference point for

activities throughout the planning period. However, perhaps the

most important benefit of these plans is the planning process

itself. This typically offers a unique opportunity, a forum, for

`information-rich' and productively focused discussions between

the various managers involved. The plan, together with the

associated discussions, then provides an agreed context for their

subsequent management activities, even for those not described in

the plan itself. The length of this whole process is shown by

Malcolm McDonald (figure 15.7).

(Fig 15.7 near here)

AUDIT 15.10

What procedures does your organization employ to ensure that its

own marketing plan is put into practice? How effective are these

procedures?

Budgets as Managerial Tools

The classic quantification of a marketing plan appears in the

form of budgets. Because these are so rigorously quantified, they

are particularly important. They should, thus, represent an

unequivocal projection of actions and expected results. What is

more, they should be capable of being monitored accurately; and,

indeed, performance against budget is the main (regular)

management review process.

The purpose of a marketing budget is, thus, to pull together all

the revenues and costs involved in marketing into one

comprehensive document. It is a managerial tool that balances

what is needed to be spent against what can be afforded, and

helps make choices about priorities. It is then used in

monitoring performance in practice.

The marketing budget is usually the most powerful tool by which

you think through the relationship between desired results and

available means. Its starting point should be the marketing

strategies and plans, which have already been formulated in the

marketing plan itself; although, in practice, the two will run in

parallel and will interact. At the very least, the rigorous,

highly quantified, budgets may cause a rethink of some of the

more optimistic elements of the plans.

Approaches to budgeting

As we saw in the earlier section on setting promotional budgets,

many budgets are based on history. They are the equivalent of

`time-series' forecasting. It is assumed that next year's budgets

should follow some trend that is discernible over recent history.

Other alternatives are based on a simple `percentage of sales' or

on `what the competitors are doing'.

However, there are many other alternatives:

'Affordable'

This may be the most common approach to budgeting. Someone,

typically the managing director on behalf of the board, decides

what is a `reasonable' promotional budget; what can be afforded.

This figure is most often based on historical spending. This

approach assumes that promotion is a cost; and sometimes is seen

as an avoidable cost.

'Percentage of revenue'

This is a variation of `affordable', but at least it forges a

link with sales volume, in that the budget will be set at a

certain percentage of revenue, and thus follows trends in sales.

However, it does imply that promotion is a result of sales,

rather than the other way round.

Both of these methods are seen by many managements to be

`realistic', in that they reflect the reality of the business

strategies as those managements see it. On the other hand,

neither makes any allowance for change. They do not allow for the

development to meet emerging market opportunities and, at the

other end of the scale, they continue to pour money into a dying

product or service (the `dog').

'Competitive parity'

In this case, the organization relates its budgets to what the

competitors are doing: for example, it matches their budgets, or

beats them, or spends a proportion of what the brand leader is

spending. On the other hand, it assumes that the competitors know

best; in which case, the service or product can expect to be

nothing more than a follower.

'Zero-based budgeting'

In essence, this approach takes the objectives, as set out in the

marketing plan, together with the resulting planned activities

and then costs them out.

AUDIT 15.11

How does your organization translate its marketing plan into

budgets? How effective is this process?

Conclusion

At the end of a lengthy book it is difficult to provide a concise

summary. Indeed, it is arguable that the practical strength of

marketing comes from its wealth of detailed techniques for

handling specific situations.

The one requirement is for the focus to be on the

'customer'; and even that rule is, at least in part, broken

by conviction marketing. The simplest, but accordingly most

powerful, model is that of:

with the emphasis very much on listening; by undertaking

'marketing research'. A comprehensive knowledge, and

understanding, of the 'customer --attitudes as well as

actions' --is generally at the heart of good marketing.

Defining the 'total product or service offering' is the all-

important decision, since almost all other decisions will be

derived from it. Thus, the techniques, such as

'segmentation' and --in particular --'positioning'

will probably be the most important for most organizations. On

the other hand, the more mechanistic models, such as the product

life-cycle and Boston Matrix, may be less widely applicable (and

sometimes even misleading).

In the longer term, changes in the wider external environment

will probably be critical to the organization's future, and

'environmental analysis' may be a skill that needs to be

acquired. In the medium term the 'competitive strategy' will

probably need to be developed.

The delivery systems, for goods (distribution) and messages

(promotion), will be very dependent upon the exact nature of the

organization's activities; but, again, in-depth knowledge of the

exact systems employed will be essential. 'Salesforce

activities' may well be more relevant to most organizations

than those relating to 'advertising' (and certainly than

sales promotion); but, on the other hand, the 'inner market', and quality in general, are important in almost all sectors.

However, above all, it is the ability to continue effectively to

meet the 'customer's needs' which determines the future of

an organization. 'As long as you are prepared to talk with your

customers, and listen to what they have to say --and want to

understand what they are really saying --you cannot fail to be a

good marketer'.

AUDIT 15.12

Turn back to your entry for audit 1.1.

Have you achieved the objectives you set for yourself? If not,

what do you need to do to rectify this shortfall?

Has the book helped you to achieve these objectives?

In any case, what more do you need to undertake to continue, and

expand, your management education?

'The end of one phase of education should always prepare the

way for the start of another'.