STRATEGIC MARKETING PLANNING

Definition

(a) Strategic marketing planningis the continuous process ofdeveloping and implementingmarketing strategies to achievespecific marketing objectives,which in turn lead to theachievement of an organization’soverall objectives.

(b) The process of strategicmarketing planning includes sixsteps as shown.

(c) Figure 1: The Strategic Marketing PlanningProcess

(d) The first three steps areimportant not only for thedevelopment of marketingstrategies but also for guidingall departments in theorganization, such asoperations, personnel andfinance.

Organizational Mission Organizati

onalObjectives

MarketingPlan

MarketingStrategy

MarketingObjectives

Organizational

Strategy

(e) These steps enable Top LevelManagements to establish thedirection for the entireorganization. Then the mission,objective and strategyestablished at the top levelprovide the foundation forplanning activities in eachdepartment.

(f) The final three steps arenecessary for developing andimplementing marketingstrategies. Thus, the finalthree steps in the strategicmarketing planning process mustflow from the first three steps.The rest of the handout providesa detailed examination of thesesix steps.

A: DEFINING THE ORGANIZATIONAL MISSION

(a) Organizational mission is aformal statement that stateswhat management wants theorganization to be and theguidelines for getting there.

(b) The organizational missionshould answer these threequestions: What businesses are we in? What businesses should we be

in? What do we do best?

When defining the mission, anorganization must consider itscapabilities and opportunities.(c) Capabilities of the

Organization: An organization’s

capabilities are related to itsdistinctive competencies – itsskills and talents in areas suchas operations, finance,marketing, management, andresources (financial, human,technological and materialutilization).

For example, one organizationmay have vast financialresources and the knowledge touse those resources efficientlyand effectively; another firm,however, might be more capablein the area of marketing oroperations. A company is likelyto enjoy a competitive edge oradvantage in an area in which itis more capable than itscompetitors. A company should

base its mission of thisdistinctive competency.

(d) Marketing Opportunities:(i) When defining the

organization’s mission,management must carefullymatch the firm’s capabilitieswith opportunities in themarket, that is, whatcustomers need and want.

(ii) Market opportunities arisewhen the right combination ofcircumstances and timingallows an organization to takeaction to reach a particularmarket. Marketers sometimesuse the term Strategic Windowto describe the often limitedperiods of time during which

market opportunities match theparticular capabilities of afirm competing in a particularmarket.

(iii) When defining theorganization’s mission,management must carefullymatch the capabilities of thefirm with opportunities in themarket.

B: ESTABLISHING ORGANIZATIONAL OBJECTIVES

(a) The second step in thestrategic marketing planningprocess is establishingorganizational objectives,which specify what theorganization wants toaccomplish. Organizational

objectives are more specificthan the organizationalmission.

(b) Table 1 illustrates sometypical organizationalobjectives.

Table 1: Typical OrganizationalObjectives

Objectives Desired Result Time Frame

Increase profits By Kshs. 5 million 1 year

Increase % of market share By 5% 1 Year

Increase sales By Kshs. 100 million 2 Years

Reduce Defective Parts

To less than 1% 1 Year

Reduce Consumer Complaints By 10% 1 Year

(c) Each objective in Table 1answers these questions: What is to be accomplished? How much is to beaccomplished?

When is it to beaccomplished?

(d) By stating exactly what isto be accomplished andproviding specific targets anda time frame, managers canrealistically evaluate theorganization’s performancetoward achieving theobjective.

(e) Organizational objectivesvary. A firm in seriousfinancial trouble may beconcerned solely with the

short term results needed tostay in business. In such acase, the firm’sorganizational objectivesprobably relate to survivingand increasing cash flow. Amore successful company,however, may want to sacrificethis year’s profits for longterm efforts, such as findingnew customers.

C: DEVELOPING ORGANIZATIONAL STRATEGY

(a) Developing organizationalstrategy is the third step instrategic marketing planning.

(b) Organizational strategydefines the means by which an

organization will achieve itsorganizational objectives.

(c) It specifies how anorganization will match itsfinancial, operations,marketing and othercapabilities with marketopportunities to achieve itsobjectives.

(d) It also provides the keyideas and concepts that willbe used to reach theorganization’s objectives.

(e) In an organization with theobjective of increasingprofits by Kshs. 5 millionwithin one year, managementwill develop organizationalstrategies that specify howthe company will accomplishthis objective. This

organizational strategy mightspecify that the companyincrease marketingexpenditures by 10%, cutoperations and labour costs by5%, or implement some otherstrategy or combination ofseveral strategies.

(f) In establishing anorganizational strategy, anorganization must assess thestatus of all its products andbusinesses – its portfolio –and plan for future growth.

(g) Assessing the status ofcurrent products andbusinesses

(i) Business portfolio analysis– evaluating anorganization’s current mix ofproducts and businesses – is

useful in developingorganizational strategy,especially in largecompanies.

It is a useful diagnostictool that helps organizationsidentify those businesses orunits that have anopportunity to grow, thosethat should be sold oreliminated, and those thatneed extra attention andresources. Competition is akey concern in this analysis.

The concept of a StrategicBusiness Unit (SBU) – adivision, product line in adivision, or other profitcentre within a parent

company – is important inbusiness - portfolioanalysis. In some cases, asingle product may be an SBU.Each strategic business unitis a single business with itsown mission of marketingdistinct products or servicesto an identifiable group ofcustomers. Each SBU has itsown manager and is incompetition with a well-defined group of competitors.

Business portfolio analysisallows an organization toassess the status of each ofits strategic business units.By examining the profitabilityof the various SBUs,management can decide how to

allocate resources among them.The company can strengthensuccessful units withadditional resources and selloff or eliminate units thatare not profitable or not fitorganizational objectives.

(ii) Determining organizationalstrategies for future growth.

After evaluating the currentbusiness portfolio, managersmust plan for future growth bydetermining organizationalstrategies that will help theorganization to continue togrow. As shown in Figure 2,organizational growthstrategies can be classifiedinto two broad categories.

Strategies that exploitopportunities in currentmarkets, and

Strategies designed forentering new markets.

Figure 2: Organizational GrowthStrategies

Current NewMarket Penetration

Market Development

Product Development

Diversification

Strategies for Current Markets

When a firm sees an opportunityto increase sales in one of its

current markets, it is likely touse one of two current marketorganizational strategies as themeans: market penetration ormarket development.

(i) Market Penetration – is astrategy of increasing salesof existing products incurrent markets. An insurancecompany, for instance, mighttry to increase its marketshare by increasing itsadvertising efforts and thesize of its sales staff.

(ii) Product development – isa strategy of increasing salesby improving existing productsor developing new products forcurrent markets.

Strategies for new markets:When a business sees thatcurrent market has littlepotential for growth, it maydecide to enter new markets,using either a marketdevelopment strategy or adiversification strategy.

(i) Market development – is astrategy of increasing salesby introducing currentproducts into new markets.This strategy often involvesexpansion into newgeographic areas.

(ii) Diversification – is astrategy of developing newproducts to sell in new

markets. Tobacco companiesare pursuing this strategybecause sales of cigarettesare declining as fewerpeople smoke in the UnitedStates. For example,American Brands Inc, hassuccessfully diversifiedfrom tobacco products,liquor and consumerproducts.

ESTABLISHING MARKETING OBJECTIVES

a)Once the organization hasanalyzed its current businesssituation and developedorganizational strategies,managers can establishmarketing objective.

b)A marketing objective askswhat is to be accomplishedthrough marketing activities.

c)Establish marketing objectivesis the fourth step instrategic marketing planning.

d)As with organizationalobjectives, marketingobjectives should be expressedin clear, simple terms so thateveryone involved understandsexactly what they are tryingto achieve and so that theiraccomplishments can bemeasured accurately.

e)Suppose a firm has anorganizational objective toincrease profits by 10% withina year. Although the firmcould choose otherorganizational strategies to

achieve this objective, inthis case, the firm decides topursue a market developmentstrategy.

One of the firm’s subsequentmarketing objectives mightthus be to increase marketshare by 5% within a year byfinding new customers forexisting products. Notice howthis marketing objective isconsistent with theorganizational objective:

Organizational Objective: Increase profits by10% within a year.

Organizational Strategy: Marketdevelopment (find

new customers for current products).

Marketing Objectives: Increase market share by 5% within a year by finding new customersfor current products.

f) Marketing objectives arebasically stated in terms ofsales volume or market share. Ifaccompany has a marketingobjective to increase marketshare by 10%, the firm should beable to accurately measurechanges in its market share. Amarketing objective should alsoindicate the time frame foraccomplishing the objective.

E: DESIGNING MARKETING STRATEGIES

a)The fifth step in strategicmarketing planning isdesigning marketingstrategies. A marketingstrategy entails selecting andanalyzing a target market anddeveloping a marketing mix forthis target market.

b)A marketing strategydetermines the means forachieving marketingstrategies. It is critical toan organization because it isused to assess consumer needsand the firm’s potential forgaining a competitiveadvantage.

c)When a marketing strategy isimplemented properly, it

achieves the organization’smarketing objectives; these,in turn contribute toaccomplishing theorganization’s overallobjectives. Thus a degree ofoverlap exists betweenorganizational strategy andmarketing strategy.

d)We now take closer look at thetwo components of designing amarketing strategy.

(i) Selecting and analyzing a Target Market

a)A target market is a group ofconsumers for whom a businesstailors a marketing mix. Theorganization focuses itsmarketing efforts on this

group of consumers, trying tomeet their specific needs andpreferences.

b)When analyzing potentialtarget markets, marketingmanagers must determinewhether the organization hasthe resources to produce amarketing mix that meets theneeds of the target market andwhether satisfying those needsis consistent with the firm’soverall objectives.

c)Managers must also evaluatepossible markets to see howentering them would affect thefirm’s sales, costs, andprofits.

d)Finally, managers mustconsider the size and the

number of competitors alreadyin that market.

e)Careful selection of a targetmarket is necessary for anorganization to achieve itsobjectives. It is importantfor an organization’smanagement to specify whichcustomers the firm is tryingto serve and have adequateinformation about thesecustomers.

(ii) Developing a Marketing Mix

The selection and analysis oftarget market provides afoundation on which a marketingmix-product, price, distributionand promotion can be developed.

These elements are calledmarketing mix variables becausemarketing managers vary the typeand amount of each elementaccording to the needs of thetarget market.An organization’s marketingstrategy should enable the firm tocreate and maintain a marketingmix that satisfies consumers’needs for a particular product.This section examines thedecisions and activities relatedto each marketing mix variable.

a)Product variable: A product canbe a good, a service, or anidea. The product variable isimportant in marketing strategydecisions because it relatesdirectly to satisfying consumer

needs and wants. Businesses mustfind out what consumers need andwant (through marketingresearch) and create productswith characteristics thatfulfill those needs and wants.Businesses may also developother aspects of the product tomeet consumers’ needs such aspackaging, labeling, warrantiesand service.

To satisfy consumers and achieveorganizational objectives, amarketer must continue todevelop new products, modify andimprove existing ones, andeliminate those that no longersatisfy buyers and yieldacceptable profits.

b)Price variable: Marketingmanagers are usually involved inestablishing pricing policiesand determining products prices.The price variable is importantin the design of marketingstrategy because consumers areconcerned about the valueobtained in a purchase, andprice is the easiest of themarketing mix variable alter.Price is often a competitivetool; in fact, extremely intenseprice competition sometimesleads to price wars. Price alsohelps to establish a product’simage.

c)Distribution variable: Indealing with the distributionvariable, a marketing manager

attempts to make productsavailable in the quantitiesdesired to as many customer aspossible and to keep physical-distribution costs (inventory,transportation, and storage) aslow as possible.

The distribution variable alsoinvolves selectingintermediaries (brokers, agentsetc), establishing andmaintaining inventory controlprocedures, and developing andmanaging transportation andstorage systems in case ofgoods.

Products can be distributed innumerous ways, and innovations

in distribution can dramaticallyimprove a firm’s sales.

d)Promotion variable: Thepromotion variable is importantin marketing strategy because itfacilitates exchanges byinforming consumers about anorganization and its products.The promotion variable includesadvertising, sales promotion,publicity and personal selling.

Promotion is used to increasepublic awareness of anorganization, a new product, ora new brand. It may also be usedto enhance a firm’s image. Inaddition, promotion is used toeducate consumers about product

features or to urge people toadopt a particular position.

F: DEVELOPING THE MARKETING PLAN

a)The final step in strategicmarketing planning isdeveloping the marketing plan.

b)A marketing plan is a formallyprepared and written documentdetailing the activitiesnecessary to implement themarketing strategies.

c)A marketing plan examines thecurrent marketing situation ofthe organization, assesses theopportunities and problemsfacing the organization,establishes the marketingstrategies and action programsneeded to achieve these

objectives, and specifies thecontrols needed to monitor theplan.

d)The contents of a typicalmarketing plan are summarizedin Table 2:

Table 2: Contents of a typical Marketing Plan

No Description1 Executive

SummaryA brief summary of the marketing plan.

2 Analysis of current marketing situation

An analysis of trends and changes in the marketing environment, the market situation, customers and competitors.

3 Assessment of opportunities and problems

The major opportunities and threats (both inside and outside the organization) facing the product for which the plan is being developed.

4 Marketing Objectives

The goals to be achieved through the marketing plan in

such areas as customer satisfaction, sales volume, or market share.

5 Marketing strategies

The overall marketing strategy-market segmentation and product, price, promotion, and distribution activities-that will be used to achieve the objectives.

6 Action programs

Pinpoints who is responsible for the marketing activities and establishes budgets and timetables for executing the marketing strategies.

7 Projected profit and loss statements

This summarizes the excepted financial pay off from the plan.

8 Controls Details the procedures for monitoring the plan over timeand for taking corrective action if needed.

e)Developing marketing plans isnot a one-time exercise. Plans

must be changed as forces inthe organization or themarketing environment change.For example, as newcompetitors enter the market,a firm may need to alter someof its marketing activities.

f)The best marketing plans arethose that are updatedcontinuously to reflectchanging conditions in themarketing environment.

g)Marketing plans may vary induration. Short-range planscover a period of one or less;medium range plans usuallyencompass two to five years.Long range marketing plansgenerally extend for more thanfive years. Long range plansare relatively rare. However,

as the marketing environmentcontinues to change andbusiness decisions grow incomplexity, profitability andsurvival will be more and moredependent on the developmentof long range plans.

Conclusion:

This handout has briefly looked atsix steps of the strategicmarketing planning process whichare: organizational missionformulation;

development of organizationobjectives;

formulation of marketing strategy;

establishment of marketingobjective; and

Development of a marketing plan.