This paper looks at what should be included within your marketing plan.
Every company, no matter how small or large, needs to develop a marketing plan in order to have a clear picture about what it wants to achieve.
A marketing plan helps a company to establish and coordinate its marketing initiatives. Marketing plans should be made at several levels of an organisation: there can be a marketing plan for the whole company and / or individual plans for different divisions.
Although there is a lot of literature about how to develop a marketing plan, there are some basic components that appear in all cases:
- current and future analysis of the organisation
- objectives setting
- development of marketing strategy
Below we will analyse the components of a more detailed marketing plan.
STEP 1: Marketing plan components
Background analysis- Current performance
– PEST analysis
– SWOT analysis
– Competitors’ analysis
– Target market segments
– Differential advantage
STEP 2: Background analysis
The first step in developing a marketing plan is to assess the current performance of the company. The plan must describe in an unambiguous and clear way how the company is performing compared to their main competitors. Marketing guru Peter Doyle suggests that there are two key measures of the health of a business: marketing and financial results.
“Marketing performance is revealed in the sales and market shares figures. Financial performance is shown by the performance of total profits, gross and net margins, return on capital employed and cash flow”.
Of course all this data will not mean much if it is not benchmarked against the competitors as well as with past years’ performances. For instance, a company may be profitable but a static presentation of figures cannot show a possible decline in profits in the last five years.
No organisation is immune to external influences from the environment it operates in. Therefore it is very important that it considers these influences before engaging in any marketing activity. It needs to take into account all the external factors that can affect its activities in a positive or negative way especially in economic environments that change rapidly. PEST analysis (also called STEP analysis) can be a valuable tool towards this direction.
PEST analysis is essentially a “scan” of the external macro environment in which the firm operates. The acronym PEST stands for:
The whole purpose of a PEST analysis is to identify all the environmental forces that can affect a business so that it can create projections of future performance.
For instance, if the analysis shows that there is an obvious tendency for a healthier diet on behalf of consumers and you are a food manufacturing company that produces mainly high calorie snacks, this is something that you can’t ignore and therefore appearing over-optimistic in the formulation of your objectives can prove very risky.
Examples of environmental factors that must be taken into account include: political stability, environmental regulations, inflation rates, and pace of technological change.
A SWOT analysis builds on the results of the PEST analysis. Its purpose is to identify the Strengths and Weaknesses of the company as well as the Opportunities and Threats that the organisation is facing. In other words, it’s an analysis of the microenvironment in which the company operates.
The whole concept of a SWOT analysis is that, after identifying all the necessary elements, the company can build on its strengths by utilising them to take advantage of opportunities that arise, whereas at the same time endeavour to correct its weaknesses and face the possible threats that inevitably will surface.
Integral to the assessment of the current and future situation is the identification of competitors’ strengths and weaknesses. Your competitors’ strengths can become a threat to your company and vice versa. It’s impossible to formulate a marketing strategy without benchmarking yourself with the competition. There is a chance that what you are proudly planning to introduce to the market has already been conceived and implemented by another company.
STEP 3: Assumptions
Inevitably you will be forced to make several assumptions in order to develop future scenarios and select the most probable one. For example in the PEST analysis you must not only identify all the factors that may influence your business but also to try to predict how these factors will evolve in the future. The time of the ancient Greek oracles has long gone and therefore assumptions will seep into your decisions.
Therefore it is important to include the most important assumptions in the marketing plan (a hypothetical example of an assumption would be that the inflation will not exceed 3% in the next year).
STEP 4: Marketing objectives
After assessing current situation and future scenarios, it is time to set long-term and short-term objectives. Objectives must reflect the background analysis and have to be SMART: specific, measurable, achievable, measurable and time-based.
Peter Doyle suggests that there are two sets of objectives: marketing and financial.
MARKETING GOALS: “The plan should have a clear sales goal. In addition it is important to specify a market share target”. Although these are the most important goals, Doyle maintains that the plan should include intermediate goals covering issues like customer satisfaction and loyalty.
FINANCIAL GOALS: The most important financial goals include profits, return on investment and cash flow.
It is important to mention that if there are multiple objectives they must not conflict each other.
Examples of marketing objectives include:
“To increase brand awareness in our target market from 10% to 30% in the next year”.
“To reduce the number of customer complaints by 5% for the next 5 years”.
STEP 5: Marketing strategy
There are two elements to address in the marketing plan when it comes to formulating the marketing strategy: the target market and the choice of differential advantage. These two comprise the positioning strategy of the business or division.
The first step is to identify what types of customers you want to sell your product or service to. Usually not everyone will be interested in your offer; therefore it is crucial to identify the most profitable segments of the market and focus all of your efforts on them. You may choose to target one, or more than one segment(s).
Segmentation can provide several advantages:
- You can offer tailored solutions to each segment based on their collective common needs, rather than a generic product or service that probably will not satisfy anyone to the full.
- You can identify untapped niches in the market that no one else has pinpointed before and become the leader in these markets.
- Better use of the company’s marketing resources.
In consumer markets, segmentation can take place by using several classification variables. The most common are:
- demographic (age, income, occupation, religion etc.)
- geographic (i.e. urban or rural area)
- phychographic (attitudes, lifestyle, hobbies, etc.)
- behavioural (brand loyalty, usage level, benefits sought etc.).
In industrial markets classification variables can include:
- type of industry (construction, banks etc.)
- organisational type (e.g. public or private sector)
- organisation size
- purchasing approaches etc.
In many cases companies segment their markets using a combination of variables. For instance a company may target 25-35 year-old customers (demographic variable) who live in Birmingham (geographic variable) and support initiatives for a cleaner environment (phychographic).
From all the different segments that can be identified the plan should include the most attractive one(s), which will comprise the target market(s).
There are five factors to take into account when you make this decision:
- Segment size
- Segment growth rate
- Profitability of the segment
- The company’s capability of competing in the segment
- Level of competition
Finally a full description of the segment must be included in the plan. The more details the plan includes about the characteristics and preferences of the target market, the more accurately tailored the solution will be for them.
The selection of the target markets shows where the business competes; the choice of differential advantage dictates how it competes.
It is imperative that the marketing plan describe clearly the unique selling proposition of the company. In other words, it should answer the question: “what do we offer that will make our product or service irresistible to our target market?” The more unique and difficult to copy the differential advantage is the more chances the company stands to achieve its objectives.
Peter Doyle identifies four criteria for a differential advantage to be sustainable:
- Customer benefit (the customer must be able to perceive a clear benefit for him or her, i.e. better quality or value for money).
- Unique (the customer should feel that it is difficult to find similar benefits elsewhere).
- Sustainable (the differential advantage must be difficult to copy).
- Profitable (a differential advantage that will not bring profits to the company is not worth pursuing).
STEP 6: Marketing mix
After defining the objectives and marketing strategy, it is important to define the major tactics to employ in order to put your marketing strategy into action. This is the implementation stage.
When we refer to the marketing mix we usually refer to McCarthy’s 4 P’s:
To address the specific needs for services marketing, three more P’s have been added to the traditional 4 P’s model:
- Physical evidence
In their work on marketing communications, Shultz, Tannenbaum and Lauterborn (1992) proposed the 4C’s instead of the classical 4P’s as a more customer oriented model:
The 4P’s are replaced as:
- Product becomes Consumer
- Price becomes Cost (to the consumer)
- Place becomes Convenience (to go and purchase the product)
- Promotion becomes Communication (a two-way dialogue. Not just promotion).
Below we look closely at each of the 4P’s:
The marketing plan must describe all the features of the product or service that will offer value to the customer as well as the benefits he/ she will derive.
Features are product characteristics such as size, colour, functionality, design, speed, texture, softness etc.
Advantages refer to the value that the features may provide to the customer depending on their needs and wants.
- Benefits are harder to describe in a generic sense because they depend wholly on the needs and wants of each potential customer. See How 2 convert value propositions into sales propositions for examples
Some authors maintain that the most compelling benefits fall under two categories: emotional and financial rewards. For instance, an emotional reward a customer may have after purchasing a Ferrari is the pleasant feeling that he feels when he receives the admiration of his peers. Financial rewards include value for money and the possibility of making money by using the product.
The pricing should reflect the overall positioning defined in the marketing strategy area. A common mistake when setting the right price is to base your decision on adding an internally agreed percentage or margin on the cost of product. This way, customers’ needs and perceptions are completely ignored and a more product-oriented approach is being adopted.
The result is that some products are priced too expensively and hence never generate the volume they should, and some products are priced too cheaply and never generate the volume or profit they should. Therefore it is imperative that a pricing strategy be formulated, which takes into account many issues like the target market and its perceptions on prices for similar products, price competitiveness, and the current economic environment to name a few.
PlacePlace refers to the means that customers use to acquire the product or service. This includes the place it is purchased as well as the distribution channels.
The marketing plan must address the issues of market coverage as well as the selection of the most appropriate distribution channel for delivering the product or service in the most convenient way for the customer. There are four basic options:
- Direct Supply (selling directly to the customer)
- Direct to the retailer
- Through a wholesaler, merchant or agent supplier
- A combination of the above
This section will address all the promotional tactics through which you inform your customers about the existence of your product. There are several methods to consider, but the final decision will be based on the marketing strategy selected for the particular product.
Below there is a list of the most common promotional tactics:
- Advertising (e.g. television, magazines, radio, Internet, posters)
- Direct marketing
- Promotional activities (e.g. sponsorships, free samples)
- Personal selling
- Press releases
- Public relations
STEP 7: Action plans and budget
These should specify the details of the implementation. It will include decisions on who is doing what as well as the dates of completion.
The final step is to create a budget which projects the revenues and costs of each marketing activity mentioned in the marketing plan. This way the management team will be able to evaluate whether the plan’s objectives are realistic and approve the allocation of funds.