A
marketing plan may be part of an overall
business planA business plan is a formal statement of a set of business goals, the reasons why they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals....
.
Solid
marketing strategyMarketing strategy is a process that can allow an organization to concentrate its limited resources on the greatest opportunities to increase sales and achieve a sustainable competitive advantage.-Developing a marketing strategy:...
is the foundation of a well-written marketing plan. While a marketing plan contains a list of actions, a marketing plan without a sound strategic foundation is of little use.
The marketing planning process
Marketing process can be realized by the marketing mix in step 4. The last step in the process is the marketing controlling.
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." The essence of the process is that it moves from the general to the specific, from the vision to the mission to the goals to the corporate objectives of the organization, then down to the individual action plans for each part of the marketing program. It is also an interactive process, so that the draft output of each stage is checked to see what impact it has on the earlier stages, and is amended.
Marketing planning aims and objectives
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. In a sales-oriented organization, the marketing planning function designs incentive pay plans to not only motivate and reward frontline staff fairly but also to align marketing activities with corporate mission.
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 suggested that the definition should cover three dimensions: "customer groups" to be served, "customer needs" to be served, and "technologies" to be used. 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]."
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, in the form of their "Superordinate Goals." "In Search of Excellence" said: "Nothing drives progress like the imagination. The idea precedes the deed." 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 were underpinned by its philosophy of "customer service," a vision originally promoted by the charismatic Watson dynasty. The emphasis at this stage is on obtaining a complete and accurate picture.
A "traditional" — albeit product-based — format for a "brand reference book" (or, indeed, a "marketing facts book") was suggested by Godley more than three decades ago:
- Financial data—Facts for this section will come from management accounting
Management accounting or managerial accounting is concerned with the provisions and use of accounting information to managers within organizations, to provide them with the basis to make informed business decisions that will allow them to be better equipped in their management and control...
, costing and finance sections.
- Product data—From production, research and development.
- Sales and distribution data — Sales, packaging, distribution sections.
- Advertising, sales promotion
Sales promotion is one of the four aspects of promotional mix. Media and non-media marketing communication are employed for a pre-determined, limited time to increase consumer demand, stimulate market demand or improve product availability...
, merchandising data — Information from these departments.
- Market data and miscellany — From market research
Market research is any organized effort to gather information about markets or customers. It is a very important component of business strategy...
, 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, 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:
- 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.
- Review of the detailed marketing activity. A study of the company's marketing mix
The term "marketing mix" was coined in 1953 by Neil Borden in his American Marketing Association presidential address. However, this was actually a reformulation of an earlier idea by his associate, James Culliton, who in 1948 described the role of the marketing manager as a "mixer of ingredients",...
; in terms of the 7 Ps - (see below)
- Review of the marketing system. A study of the marketing organization, marketing research
Marketing research is "the function that links the consumer, customer, and public to the marketer through information — information used to identify and define marketing opportunities and problems; generate, refine, and evaluate marketing actions; monitor marketing performance; and improve...
systems and the current marketing objectivesA marketing objective may be part of an overall business objective.The phrase “marketing objectives” can be defined as: Marketing ‘goals’ that the business must achieve in order to meet its wider business goals. Marketing objectives state where a business or company intends to be at some specific...
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.
-
- Portfolio planning. In addition, the coordinated planning of the individual products and services can contribute towards the balanced portfolio.
- 80:20 rule. To achieve the maximum impact, the marketing plan must be clear, concise and simple. It needs to concentrate on the 20 percent of products or services, and on the 20 percent of customers, that will account for 80 percent of the volume and 80 percent of the profit.
- 7 Ps: Product, Place, Price and Promotion, Physical Environment, People, Process. The 7 Ps can sometimes divert attention from the customer, but the framework they offer can be very useful in building the action plans.
It is only at this stage (of deciding the
marketing objectivesA marketing objective may be part of an overall business objective.The phrase “marketing objectives” can be defined as: Marketing ‘goals’ that the business must achieve in order to meet its wider business goals. Marketing objectives state where a business or company intends to be at some specific...
) 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 objectivesA marketing objective may be part of an overall business objective.The phrase “marketing objectives” can be defined as: Marketing ‘goals’ that the business must achieve in order to meet its wider business goals. Marketing objectives state where a business or company intends to be at some specific...
" state just where the company intends to be at some specific time in the future.
James Quinn succinctly defined 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 behavior 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 objectivesA marketing objective may be part of an overall business objective.The phrase “marketing objectives” can be defined as: Marketing ‘goals’ that the business must achieve in order to meet its wider business goals. Marketing objectives state where a business or company intends to be at some specific...
. They are part of the marketing strategy needed to achieve
marketing objectivesA marketing objective may be part of an overall business objective.The phrase “marketing objectives” can be defined as: Marketing ‘goals’ that the business must achieve in order to meet its wider business goals. Marketing objectives state where a business or company intends to be at some specific...
. 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 shareMarket share is the percentage of a market accounted for by a specific entity. In a survey of nearly 200 senior marketing managers, 67 percent responded that they found the "dollar market share" metric very useful, while 61% found "unit market share" very useful.Marketers need to be able to...
, percentage penetration of distribution outlets and so on. An example of such a measurable
marketing objectiveA marketing objective may be part of an overall business objective.The phrase “marketing objectives” can be defined as: Marketing ‘goals’ that the business must achieve in order to meet its wider business goals. Marketing objectives state where a business or company intends to be at some specific...
might be "to enter the market with product Y and capture 10 percent 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 objectivesA marketing objective may be part of an overall business objective.The phrase “marketing objectives” can be defined as: Marketing ‘goals’ that the business must achieve in order to meet its wider business goals. Marketing objectives state where a business or company intends to be at some specific...
must usually be based, above all, on the organization's financial & business objectives; converting these financial measurements into the related marketing measurements.He went 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."Simplifying somewhat, marketing strategies can be seen as the means, or "game plan," by which
marketing objectivesA marketing objective may be part of an overall business objective.The phrase “marketing objectives” can be defined as: Marketing ‘goals’ that the business must achieve in order to meet its wider business goals. Marketing objectives state where a business or company intends to be at some specific...
will be achieved and, in the framework that we have chosen to use, are generally concerned with the 8 P's. Examples are:
- Price — The amount of money needed to buy products
- Product — The actual product
- Promotion (advertising)- Getting the product known
- Placement — Where the product is sold
- People — Represent the business
- Physical environment — The ambiance, mood, or tone of the environment
- Process — The Value-added services that differentiate the product from the competition (e.g. after-sales service, warranties)
- Packaging — How the product will be protected
(Note: At GCSE the 4 Ps are Place, Promotion, Product and Price and the "secret" 5th P is Packaging, but which applies only to physical products, not services usually, and mostly those sold to individual consumers)
In principle, these strategies describe how the objectives will be achieved. The 7 Ps are a useful framework for deciding how the company's resources will be manipulated (strategically) to achieve the objectives. However, 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 7 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 judgment, experience, market research or anything else which helps you to look at your conclusions from all possible angles.
Detailed plans and programs
At this stage,you will need to develop your overall marketing strategies into detailed plans and program. Although these detailed plans may cover each of the 7 Ps (
marketing mixThe term "marketing mix" was coined in 1953 by Neil Borden in his American Marketing Association presidential address. However, this was actually a reformulation of an earlier idea by his associate, James Culliton, who in 1948 described the role of the marketing manager as a "mixer of ingredients",...
), the focus will vary, depending upon your organization's specific strategies. A product-oriented company will focus its plans for the 7 Ps around each of its products. A market or geographically oriented 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. Brochures and Websites are used effectively.
Again, the most important element is, indeed, that of the detailed plans, which spell out exactly what programs 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 programs and activities which will then constitute the "marketing" of the organization over the period. As a result, these detailed marketing programs are the most important, practical outcome of the whole planning process. These plans must 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
The Pareto principle states that, for many events, roughly 80% of the effects come from 20% of the causes.Business-management consultant Joseph M...
applies in this context too.
- 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 learnt, to be incorporated in the next year's .
Content of the marketing plan
A marketing plan for a small business typically includes Small Business Administration Description of competitors, including the level of demand for the product or service and the strengths and weaknesses of competitors
- Description of the product or service, including special features
- Marketing budget
A budget is a financial plan and a list of all planned expenses and revenues. It is a plan for saving, borrowing and spending. A budget is an important concept in microeconomics, which uses a budget line to illustrate the trade-offs between two or more goods...
, including the advertising and promotional plan
- Description of the business location, including advantages and disadvantages for marketing
- Pricing strategy
- Market Segmentation
Medium-sized and large organizations
The main contents of a marketing plan are:
- Executive Summary
- Situational Analysis
- Opportunities / Issue Analysis - SWOT Analysis
SWOT analysis is a strategic planning method used to evaluate the Strengths, Weaknesses/Limitations, Opportunities, and Threats involved in a project or in a business venture...
- Objectives
- Strategy
- Action Program (the operational marketing plan itself for the period under review)
- Financial Forecast
- Controls
In detail, a complete marketing plan typically includes:
- Title page
- Executive Summary
- Current Situation - Macroenvironment
Environmental scanning is one component of the global environmental analysis. Environmental monitoring, environmental forecasting and environmental assessment complete the global environmental analysis. Environmental scanning refers to the macro environment.The global environment refers to the...
- economy
- legal
- government
- technology
- ecological
- sociocultural
- supply chain
- Current Situation - Market Analysis
Industry or market research is the acquisition of corporate intelligence on a broad range of issues including:* Macroenvironment**economy**government**law**technology**ecological* Market analysis and competitor analysis**market definition**market size...
- market definition
- market size
- market segment
Market segmentation is a concept in economics and marketing. A market segment is a sub-set of a market made up of people or organizations with one or more characteristics that cause them to demand similar product and/or services based on qualities of those products such as price or function...
ation
- industry structure and strategic groupings
- Porter 5 forces analysis
Porter's five forces analysis is a framework for industry analysis and business strategy development formed by Michael E. Porter of Harvard Business School in 1979. It draws upon industrial organization economics to derive five forces that determine the competitive intensity and therefore...
- competition and market share
- competitors' strengths and weaknesses
Competitor analysis in marketing and strategic management is an assessment of the strengths and weaknesses of current and potential competitors. This analysis provides both an offensive and defensive strategic context to identify opportunities and threats...
- market trends
- Current Situation — Consumer Analysis
- nature of the buying decision
- participants
- demographics
Demographics are the most recent statistical characteristics of a population. These types of data are used widely in sociology , public policy, and marketing. Commonly examined demographics include gender, race, age, disabilities, mobility, home ownership, employment status, and even location...
- psychographics
- buyer motivation and expectations
- loyalty segments
- Current Situation — Internal
- company resources
- financial
- people
- time
- skills
- objectives
- mission statement and vision statement
- corporate objectives
- financial objective
- marketing objectives
- long term objectives
- description of the basic business philosophy
- corporate culture
- Summary of Situation Analysis
- external threats
- external opportunities
- internal strengths
- internal weaknesses
- Critical success factor
Critical success factor is the term for an element that is necessary for an organization or project to achieve its mission. It is a critical factor or activity required for ensuring the success of a company or an organization. The term was initially used in the world of data analysis, and business...
s in the industry
- our sustainable competitive advantage
Competitive advantage is defined as the strategic advantage one business entity has over its rival entities within its competitive industry. Achieving competitive advantage strengthens and positions a business better within the business environment....
- Marketing research
Marketing research is "the function that links the consumer, customer, and public to the marketer through information — information used to identify and define marketing opportunities and problems; generate, refine, and evaluate marketing actions; monitor marketing performance; and improve...
- information requirements
- research methodology
- research results
- Marketing Strategy - Product
Product management is an organizational lifecycle function within a company dealing with the planning, forecasting, or marketing of a product or products at all stages of the product lifecycle....
- product mix
- product strengths and weaknesses
- perceptual mapping
Perceptual mapping is a graphics technique used by asset marketers that attempts to visually display the perceptions of customers or potential customers. Typically the position of a product, product line, brand, or company is displayed relative to their competition.Perceptual maps can have any...
- product life cycle management
Product life-cycle management is the succession of strategies used by business management as a product goes through its life-cycle. The conditions in which a product is sold changes over time and must be managed as it moves through its succession of stages.Product life-cycle Like human beings,...
and new product developmentIn business and engineering, new product development is the term used to describe the complete process of bringing a new product to market. A product is a set of benefits offered for exchange and can be tangible or intangible...
- Brand name
The American Marketing Association defines a brand as a "Name, term, design, symbol, or any other feature that identifies one seller's good or service as distinct from those of other sellers."...
, brand image, and brand equityBrand equity is the marketing effects and outcomes that accrue to a product with its brand name compared with those that would accrue if the same product did not have the brand name. Fact of the well-known brand name is that, the company can sometimes charge premium prices from the consumer . And,...
- the augmented product
In general, the product is defined as a "thing produced by labor or effort" or the "result of an act or a process", and stems from the verb produce, from the Latin prōdūce ' lead or bring forth'. Since 1575, the word "product" has referred to anything produced...
- product portfolio analysis
- B.C.G. Analysis
- contribution margin analysis
- G.E. Multi Factoral analysis
- Quality Function Deployment
Quality function deployment is a “method to transform user demands into design quality, to deploy the functions forming quality, and to deploy methods for achieving the design quality into subsystems and component parts, and ultimately to specific elements of the manufacturing process.”, as...
- Marketing Strategy - segmented
Market segmentation is a concept in economics and marketing. A market segment is a sub-set of a market made up of people or organizations with one or more characteristics that cause them to demand similar product and/or services based on qualities of those products such as price or function...
marketing actions and market shareMarket share is the percentage of a market accounted for by a specific entity. In a survey of nearly 200 senior marketing managers, 67 percent responded that they found the "dollar market share" metric very useful, while 61% found "unit market share" very useful.Marketers need to be able to...
objectives
- by product,
- by customer segment,
- by geographical market,
- by distribution channel.
- Marketing Strategy - Price
Pricing is the process of determining what a company will receive in exchange for its products. Pricing factors are manufacturing cost, market place, competition, market condition, and quality of product. Pricing is also a key variable in microeconomic price allocation theory. Pricing is a...
- pricing objectives
Pricing objectives or goals give direction to the whole pricing process. Determining what your objectives are is the first step in pricing. When deciding on pricing objectives you must consider: 1) the overall financial, marketing, and strategic objectives of the company; 2) the objectives of your...
- pricing method (e.g.: cost plus, demand based, or competitor indexing)
- pricing strategy (e.g.: skimming, or penetration)
- discounts and allowances
Discounts and allowances are reductions to a basic price of goods or services.They can occur anywhere in the distribution channel, modifying either the manufacturer's list price , the retail price , or the list price Discounts and allowances are reductions to a basic price of goods or services.They...
- price elasticity
Price elasticity of demand is a measure used in economics to show the responsiveness, or elasticity, of the quantity demanded of a good or service to a change in its price. More precisely, it gives the percentage change in quantity demanded in response to a one percent change in price...
and customer sensitivity
- price zoning
Geographical pricing, in marketing, is the practice of modifying a basic list price based on the geographical location of the buyer. It is intended to reflect the costs of shipping to different locations.There are several types of geographic pricing:...
- break even analysis at various prices
- Marketing Strategy - promotion
Promotion is one of the four elements of marketing mix . It is the communication link between sellers and buyers for the purpose of influencing, informing, or persuading a potential buyer's purchasing decision....
- promotional goals
- promotional mix
There are seven main aspects of a promotional mix. These are:* Advertising - Presentation and promotion of ideas, goods, or services by an identified sponsor...
- advertising
Advertising is a form of communication used to persuade an audience to take some action with respect to products, ideas, or services. Most commonly, the desired result is to drive consumer behavior with respect to a commercial offering, although political and ideological advertising is also common...
reach, frequency, flights, theme, and media
- sales force
A sale is the act of selling a product or service in return for money or other compensation. It is an act of completion of a commercial activity....
requirements, techniques, and management
- sales promotion
Sales promotion is one of the four aspects of promotional mix. Media and non-media marketing communication are employed for a pre-determined, limited time to increase consumer demand, stimulate market demand or improve product availability...
- publicity
Publicity is the deliberate attempt to manage the public's perception of a subject. The subjects of publicity include people , goods and services, organizations of all kinds, and works of art or entertainment.From a marketing perspective, publicity is one component of promotion which is one...
and public relationsPublic relations is the actions of a corporation, store, government, individual, etc., in promoting goodwill between itself and the public, the community, employees, customers, etc....
- electronic promotion (e.g.: Web, or telephone
Direct marketing is a channel-agnostic form of advertising that allows businesses and nonprofits to communicate straight to the customer, with advertising techniques such as mobile messaging, email, interactive consumer websites, online display ads, fliers, catalog distribution, promotional...
)
- word of mouth marketing (buzz)
- viral marketing
Viral marketing, viral advertising, or marketing buzz are buzzwords referring to marketing techniques that use pre-existing social networks to produce increases in brand awareness or to achieve other marketing objectives through self-replicating viral processes, analogous to the spread of viruses...
- Marketing Strategy - Distribution
Product distribution is one of the four elements of the marketing mix. An organization or set of organizations involved in the process of making a product or service available for use or consumption by a consumer or business user.The other three parts of the marketing mix are product, pricing,...
- geographical coverage
- distribution channels
- physical distribution and logistics
- electronic distribution
- Implementation
- personnel requirements
- assign responsibilities
- give incentives
- training on selling methods
- financial requirements
- management information system
A management information system provides information needed to manage organizations efficiently and effectively. Management information systems involve three primary resources: people, technology, and information. Management information systems are distinct from other information systems in that...
s requirements
- month-by-month agenda
- PERT
The Program ' Evaluation and Review Technique, commonly abbreviated PERT, is a statistical tool, used in project management, that is designed to analyze and represent the tasks involved in completing a given project...
or critical path analysis
- monitoring results and benchmarks
- adjustment mechanism
- contingencies (What if's)
- Financial Summary
- assumptions
- pro-forma monthly income statement
- contribution margin analysis
- breakeven analysis
- Monte Carlo method
Monte Carlo methods are used in finance and mathematical finance to value and analyze instruments, portfolios and investments by simulating the various sources of uncertainty affecting their value, and then determining their average value over the range of resultant outcomes. This is usually done...
- ISI: Internet Strategic Intelligence
- Scenarios
- Prediction of Future Scenarios
- Plan of Action for each Scenario
- Appendix
- pictures and specifications of the new product
- results from research already completed
Measurement of progress
The final stage of any marketing planning process is to establish targets (or standards) so that progress can be monitored. Accordingly, it is important to put both quantities and timescales into the marketing objectives (for example, to capture 20 percent by value of the market within two years) and into the corresponding strategies.
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 simply 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
Few organizations track market share though it is often an important metric. Though absolute sales might grow in an expanding market, a firm's share of the market can decrease which bodes ill for future sales when the market 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
- annual fluctuation rate of market share
- also the specific market sharing of customers.
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
Net profit or net revenue is a measure of the profitability of a venture after accounting for all costs. In a survey of nearly 200 senior marketing managers, 91 percent responded that they found the "net profit" metric very useful...
- gross profit
In accounting, gross profit or sales profit is the difference between revenue and the cost of making a product or providing a service, before deducting overhead, payroll, taxation, and interest payments...
<>return on investmentReturn on investment is one way of considering profits in relation to capital invested. Return on assets , return on net assets , return on capital and return on invested capital are similar measures with variations on how “investment” is defined.Marketing not only influences net profits but also...
- 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.
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
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. Additionally, marketing plans are included in business plans, offering data showing investors how the company will grow and most importantly, how they will get a return on investment.
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.
See also
- Business plan
A business plan is a formal statement of a set of business goals, the reasons why they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals....
- Marketing
Marketing is the process used to determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It generates the strategy that underlies sales techniques, business communication, and business developments...
- Marketing management
Marketing management is a business discipline which is focused on the practical application of marketing techniques and the management of a firm's marketing resources and activities...
- Strategic management
Strategic management is a field that deals with the major intended and emergent initiatives taken by general managers on behalf of owners, involving utilization of resources, to enhance the performance of firms in their external environments...