1. Strategic Market Planning: Take the Big Picture
Chapter 2
Strategic Market Planning: Take the Big Picture

2. Chapter Objectives Explain the strategic planning process
Understand the three levels of business planning: strategic, functional and operational
Describe the steps in marketing planning
Thoroughly discuss key marketing planning concepts: Target Marketing & The Marketing Mix

3. Figure 2.1 Levels of Planning in a Company
Corporate management typically includes the chief executive officers (CEOs), president, chief financial officers (CFOs), and other top level planners. Planning done at the strategic level is long range (3–5 years). The mission, objectives, business portfolio, and growth strategy decisions set at this level “set the stage” and FLOW THROUGH to the functional and operational planning levels; both functional and operational plans need to be consistent with the corporate strategic plan, and further the mission and goals of the organization following the growth strategies set forth in the corporate plan. Functional level is performed by either Vice Presidents or top level functional area managers (VP Sales for many industrial or business-to-business firms; VP of Marketing for many consumer goods firms). Operational planning flows from the marketing plan, and is further developed by supervisory managers who might be product or brand managers, advertising managers, sales managers for particular products, divisions, or geographic territories, publicists, specialists in marketing research, etc.

4. Strategic Planning
Strategic Planning - Managerial decision process that matches a firm’s resources and capabilities to its market opportunities for long-term growth and survival
Top management defines firm’s purpose (mission statement) and objectives
Mission Statement Example: MADD: “to stop drunk driving, support the victims of this violent crime, and prevent underage drinking”
Objective Example: increase firm’s total revenues by 20% over next five years

5. Functional (aka “Tactical”) Planning
Accomplished by various functional areas of firm, such as Marketing, HR, Operations, etc
Typically includes:
A broad 3- 5 year plan to support strategic plan
A detailed annual plan
Example: marketing plan objective for Ford: The objective for the Ford Focus is to achieve a 10% share of the subcompact market during the 2010 calendar year

6. Operational Planning
First-line managers focus on day-to-day execution of functional plans
Such planning includes detailed annual, semiannual, or quarterly plans
Example: an objective may be set in terms of units of a product a particular salesperson needs to sell per month (sales quota)

7. All Business Planning Is an Integrated Activity
Strategic, functional, and operational plans must work together to benefit the whole firm
Marketers must fully understand how they fit with the organization’s direction and resources

8. Where the Marketing Planning Process Fits Into overall Company Planning

9. Why Write a Marketing Plan?
Written marketing plans force companies to have concrete objectives and strategies
They provide a reference during the planning period (1 year or several years) to stay on track, get back on track, or get on track
They can be shared with key company employees and outsiders to educate them
Refer your students back to the tear-out marketing plan guideline, located between pages 50 and 51 of the text.

10. Marketing Planning: Step 1
Step 1 - Perform a situation analysis
Builds on SWOT; identifies how the internal and external environments affect the marketing plan
What trends impact the marketing plan for Netflix?

11. Marketing Planning: Step 2
Step 2 - Set marketing objectives
Specific to the firm’s brands and other marketing mix-related elements
States what the marketing function must accomplish if firm is to achieve its overall business objectives
Stated in terms of sales volumes & market share
The objective of the California almond growers is to increase consumption of almonds.

12. Marketing Planning: Step 3
Step 3 - Develop marketing strategies to achieve marketing objectives
Marketing strategy: a firm’s overall program for selecting and satisfying their target markets
A marketing strategy is aimed at satisfying consumers in the selected target markets through a careful balance of the elements of the Marketing Mix – Product, Price, Place, & Promotion

13. Formulating a Marketing Strategy
Target Market - Group of people toward whom the firm decides to direct its marketing efforts, by segmenting the market by:
Demographics – age, income, gender, etc
Psychographics – lifestyle & hobbies
Geographics – location of residence
Product-related - benefits, usage, loyalty
Q. What would be a target market for the new Nissan 370Z Convertible using each of these segmentation methods?

14. Elements of the Marketing Mix
Marketing Mix – a strategy is developed for each element of the mix:
Product strategy
Distribution (Place) strategy
Promotion strategy
Pricing strategy
**The Marketing Mix consists of how the 4 are blended together to fit the needs and preferences of a specific target market

15. Product Strategy (goods & services)
What goods or services to offer
Ingredients and features
Customer service
Package design
Brand names
Trademarks
Warranties
Product Positioning – how you want customers to perceive the product

16. 2. Distribution Strategy
Modes of transportation
Warehousing
Inventory control
Order processing
Supply channels (retailers, wholesalers, etc)

17. 3. Promotion Strategy
Blending together the various elements of promotion to communicate most effectively with the target market
Promotional elements (the Promotion Mix):
Advertising
Sales promotion
Public relations
Direct marketing
Personal selling

18. Advertising As a Part of the Pepto-Bismol Promotional Strategy

19. 4. Pricing Strategy
Deals with the methods of setting profitable and justifiable prices
Pricing is:
Dependent upon competition
Based upon supply and demand
Closely regulated

20. Marketing Planning Step 4: Implement and Control the Marketing Plan
Implement = Execute. DO IT!
Control - Measuring actual performance, comparing performance to the objectives, and making adjustments where needed
Marketing metrics:
Return on marketing investment (ROMI) - the revenue generated by investment in a specific marketing program divided by the cost of that program (expenditure) at a given risk level
Examples of metrics: cost of a prospect, customer acquisition cost, click through rate, response rate, (coupon) redemption rate, sales calls per day, customer retention rate, etc.
Some metrics are based on survey data that requires systematic, ongoing marketing research (customer satisfaction, perceived product quality, perceived service quality, company/product reputation).

21. Addendum – Strategic Planning
The following slides provide more information about Corporate Level Strategic Planning…

22. Strategic Planning Step 1: Define the Mission
Answer three key questions:
What business are we in?
What customers should we serve?
How do we develop the firm’s capabilities and focus its efforts?
Mission statement:
A formal document that describes the firm’s overall purpose and what it hopes to achieve in terms of its customers, products, and resources

23. Step 2: Evaluate the Internal and External Environments
Situational analysis
An assessment of a firm’s internal and external environments
Internal environment: Controllable elements inside of an organization
External environment: Uncontrollable elements outside of an organization that may affect its performance either positively or negatively

24. Internal Environment
Controllable elements inside a firm that influence how well the firm operates include:
People (human capital), physical facilities, financial stability, corporate reputation, quality products, strong brands, technologies, etc.
These elements represent key strengths and weaknesses of the firm

25. External Environment
Elements outside the firm that may affect it either positively or negatively:
Economic, competitive, technological, legal/political/ethical, and sociocultural trends
Trends manifest as opportunities or threats
Firm cannot directly control external factors but can respond to them via planning
Trendwatching.com offers a free monthly trend insight newsletter via monthly. Many of the articles posted on this Web site are of interest to marketers in general, and professors can often find current examples that demonstrate the integration of trends, products, and marketing communication campaigns.
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26. SWOT Analysis
An analysis of an organization’s strengths (S) and weaknesses (W) and the opportunities (O) and threats (T) in the external environment
SWOT enables the firm to develop strategies that maximize strengths and capitalize upon opportunities
A nice outside-the-class activity assigned prior to lecture might challenge half of the students to identify the internal and external strengths of a well-known local business (bar, restaurant, club) or the University itself, while the other half of class identifies current trends stemming from the external environment that are relevant to the business. Class time could then be devoted to demonstrating the SWOT process using the information gathered by the class.

27. Step 3: Set Organizational or SBU Objectives
Very large multiproduct firms may have divisions called strategic business units (SBUs)
SBUs operate like separate businesses with their own mission, business objectives, resources, managers, and competitors
Strategic planning is done at both the corporate and SBU levels

28. Organizational/SBU Objectives
What the firm hopes to accomplish with long-range business plan
Need to be specific, measurable, attainable, and sustainable
May relate to sales, profitability, product development, market share, productivity, ROI, customer satisfaction, or social responsibility

29. Strategic Business Units (SBUs)
Large firms like the Walt Disney Company usually operate several SBUs. Disney SBUs include theme parks, movie studios, TV networks, and cruise line

30. Figure 2.2 SBUs and the Strategic Plan

31. Step 4: Establish the Business Portfolio
The group of different products or brands owned by a firm and having different income-generating and growth capabilities
Portfolio analysis:
Assessing the potential of a firm’s SBUs
Helps make decisions regarding which SBUs should receive more or less of the firm’s resources

32. Figure 2.3 Boston Consulting Group (BCG) Matrix
The purpose of the BCG matrix is to aid management in decisions related to financial resource allocation by classifying the various SBUs into one of four categories based on the SBUs market growth rate and relative market share.
The market growth rate is meant to provide an estimate of market attractiveness, while the relative market share serves as a proxy for company strength in the market. Market growth rate is usually measured in terms of the annual growth rate. Relative market share is typically measured by calculating the SBU’s market share relative to its’ largest competitor. Thus a relative share of .1 would mean that the SBU has only 1/10th of the share of its largest competitor (falling into the low relative market share cell), while a relative share of 2 would indicate that SBU is the market leader, with twice the market share of its largest competitor (falling within the high market share cell). Some caution should be exercised when discussing market growth rates, as this figure does not take into account the overall size of the market itself.
The text describes each of the four subcategories adequately, but the build, hold, harvest, and divesture strategies might require additional explanation.
Building is most appropriate for question marks, as their relative shares must grow if they are going to evolve into stars. Building requires substantial resource investment, and if resources are limited, funds may be better allocated to Stars. Stars require heavy investment so that their relative market share keeps pace with and capitalizes upon the market growth. Of course the market growth rate will eventually decline, and Stars eventually grow into Cash Cows. Cash cows need less investment to hold their market share, and consistently produce more money than they consume. Harvesting occurs when the decision is make to “milk the cash cow” which results in the elimination of R&D, reduced advertising and promotional expenses, and other cost cutting measures. However, too little resource investment (Harvesting) may result in a slippage of the relative market share to the point where a once profitable cash cow degrades into a dog. Companies face two alternatives with dogs: Divesting the business early in its life as a dog while it is in relatively good shape can make a decent return; harvesting the business decreases the future value of the dog when divested, but harvesting can also provide income in a steady stream over time.

33. Step 5: Develop Growth Strategies
Product-market growth matrix:
Characterizes different growth strategies according to type of market (new vs. existing) and type of product (new vs. existing).
Matrix yields four potential strategies:
Market penetration
Product development
Market development
Diversification

34. Figure 2.4 Product-Market Growth Matrix