IB Business Management:
4.2 Marketing planning
Marketing planning is the systematic process of devising marketing objectives and appropriate marketing strategies to achieve these goals. It requires the collection and analysis of information about a particular market, such as market research data on existing and potential consumers. The typical marketing process involves market segmentation, targeting and positioning a brand, product or business. There is an aim to differentiate a product from the competition by creating a unique selling point or selling proposition.
Key learning outcomes:
Marketing planning: The process of formulating appropriate strategies and preparing marketing activities to meet marketing objectives.
The marketing mix – SIVA
Marketing planning begins with market research to determine PRODUCT (Solution), PROMOTION (Information), PRICE (Value) and PLACE (Access) – SIVA.
The marketing mix is made up of seven interrelated decisions − the 7Ps. The four key ones are product, price, promotion (including advertising and packaging) and place (where and how a product will be sold to consumers).
The other 3Ps largely relate to marketing services – people, process and physical evidence.
The marketing mix:
The target market will effect the marketing mix
The marketing plan
A marketing plan is often a formal written document which outlines in detail how the business unit intends to achieve the marketing objectives derived from the corporate objectives.
Effective market planning is nearly always based on clear awareness of market trends, competitors’ actions and consumer wants so market research is vital. The plan will then contain detailed action programmes, budgets, sales forecasts and strategies – and these strategies will be based on adaptations of the firm’s marketing mix.
Marketing mix: The key decisions that must be taken in the effective marketing of a product.
Not all of the 7Ps have the same degree of significance in every case. It is vital that these elements fit together into a coherent and integrated plan. An appropriate marketing mix will ensure that these marketing decisions are interrelated. They must be carefully coordinated to make sure that customers are not confused by conflicting messages being given about the good or service being sold.
Coordinated marketing mix: Key marketing decisions complement each other and work together to give customers a consistent message about the product.
If just one part of the marketing is inconsistent or does not integrate with the rest, it may lead to the failure of even the best marketing plan. The most appropriate marketing mix decisions will therefore be:
The coordinated marketing mix
Developing a marketing mix
Once a firm has defined its target market and identified its competitive advantage, it can create the marketing mix, which is based on the 5Ps discussed earlier, that brings a specific group of consumers a product with superior value. Every target market requires a unique marketing mix to satisfy the needs of the target customers and meet the firm’s goals. A strategy must be constructed for each of the 4Ps (7Ps for services marking), and all strategies must be blended with the strategies of the other elements. Thus, the marketing mix is only as good as its weakest part. For example, an excellent product with a poor distribution system could be doomed to failure.
An excellent product with an excellent distribution system but an inappropriate price is also doomed to failure. A successful marketing mix requires careful tailoring. For instance, at first glance you might think that McDonald’s and Wendy’s have roughly the same marketing mix. After all, they are both in the fast-food business. But McDonald’s targets parents with young children through Ronald McDonald, heavily promoted children’s Happy Meals, and in-store playgrounds. Wendy’s is targeted to a more adult crowd. Wendy’s has no playgrounds, but it does have flat-screen TVs, digital menu boards, and comfy leather seating by a fireplace in many stores (a more adult atmosphere), and it has expanded its menu to include more items for adult tastes.
Marketing strategy typically starts with the product. Marketers can’t plan a distribution system or set a price if they don’t know exactly what product will be offered to the market. Marketers use the term product to refer to goods, services, or even ideas. Examples of goods would include tires, phones, and clothing. Goods can be divided into business goods (commercial or industrial) or consumer goods. Examples of services would be hotels, hair salons, airlines, and engineering and accounting firms. Services can be divided into consumer services, such as lawn care and hair styling, or professional services, such as engineering, accounting, or consultancy. In addition, marketing is often used to “market” ideas that benefit companies or industries, such as the idea to “go green” or to “give blood.” Businesses often use marketing to improve the long-term viability of their industries, such as the avocado industry or the milk industry, which run advertising spots and post social media messages to encourage consumers to view their industries favourably. Thus, the heart of the marketing mix is the good, service, or idea. Creating a product strategy involves choosing a brand name, packaging, colours, a warranty, accessories, and a service program.
Marketers view products in a much larger context than is often thought. They include not only the item itself but also the brand name and the company image. The names Ralph Lauren and Gucci, for instance, create extra value for everything from cosmetics to bath towels. That is, products with those names sell at higher prices than identical products without the names. Consumers buy things not only for what they do, but also for what they mean.
With their computerised profile-matching capabilities, online dating services are a high-tech way to make a love connection. Today’s date-seeking singles want more than automated personals, however. They want advice from experts. At Match.com, popular shrink Dr. Phil guides subscribers toward healthy relationships. At eHarmony.com, Dr. Neil Clark Warren helps the lovelorn find a soulmate.
Place (distribution) strategy
Place (distribution) strategy is creating the means (the channel) by which a product flows from the producer to the consumer. Place includes many parts of the marketing endeavor. It includes the physical location and physical attributes of the business, as well as inventory and control systems, transportation, supply chain management, and even presence on the web. One aspect of distribution strategy is deciding how many stores and which specific wholesalers and retailers will handle the product in a geographic area. Cosmetics, for instance, are distributed in many different ways. Avon has a sales force of several hundred thousand representatives who call directly on consumers. Clinique and Estée Lauder are distributed through selected department stores. Cover Girl and Coty use mostly chain drugstores and other mass merchandisers. Redken products sell through hair salons. Revlon uses several of these distribution channels. For services, place often becomes synonymous with both physical location (and attributes of that location such as atmospherics) and online presence. Place strategy for services also includes such items as supply chain management. An example would be that an engineering firm would develop offices with lush interiors (to denote success) and would also have to manage the supplies for ongoing operations such as the purchase of computers for computer-aided drafting.
Pricing strategy is based on demand for the product and the cost of producing that product. However, price can have a major impact on the success of a product if the price is not in balance with the other components of the 5Ps. For some products (especially service products), having a price that is too low may actually hurt sales. In services, a higher price is often equated with higher value. For some types of specialty products, a high price is expected, such as prices for designer clothes or luxury cars. Even costume jewelry is often marked up more than 1000 percent over the cost to produce it because of the image factor of a higher price. Special considerations can also influence the price. Sometimes an introductory price is used to get people to try a new product. Some firms enter the market with low prices and keep them low, such as Carnival Cruise Lines and Suzuki cars. Others enter a market with very high prices and then lower them over time, such as producers of high-definition televisions and personal computers.
Many people feel that promotion is the most exciting part of the marketing mix. Promotion strategy covers personal selling, traditional advertising, public relations, sales promotion, social media, and e-commerce. These elements are called the promotional mix. Each element is coordinated with the others to create a promotional blend. An advertisement, for instance, helps a buyer get to know the company and paves the way for a sales call. A good promotional strategy can dramatically increase a firm’s sales.
Public relations plays a special role in promotion. It is used to create a good image of the company and its products. Bad publicity costs nothing to send out, but it can cost a firm a great deal in lost business. Public relations uses many tools, such as publicity, crisis management strategy, and in-house communication to employees. Good publicity, such as a television or magazine story about a firm’s new product, may be the result of much time, money, and effort spent by a public-relations department. Public-relations activities always cost money—in salaries and supplies. Public-relations efforts are the least “controllable” of all the tools of promotion, and a great deal of effort and relationship-building is required to develop the ongoing goodwill and networking that is needed to enhance the image of a company.
Sales promotion directly stimulates sales. It includes trade shows, catalogs, contests, games, premiums, coupons, and special offers. It is a direct incentive for the customer to purchase the product immediately. It takes many forms and must adhere to strict laws and regulations. For example, some types of contests and giveaways are not allowed in all the states within the United States. McDonald’s discount coupons and contests offering money and food prizes are examples of sales promotions.
Social media is a major element of the promotion mix in today’s world. Most businesses have a corporate website, as well as pages on different social media sites such as Facebook, Pinterest, and Twitter. Social media is more powerful as a channel for getting the company’s message out to the target market (or general public) than traditional advertising, especially for some target markets. Companies (and even individuals) can use social media to create instant branding.
E-commerce is the use of the company website to support and expand the marketing strategies of the 4Ps. It can include actual “order online” capabilities, create online communities, and be used to collect data from both existing and potential customers. Some e-commerce websites offer free games and other interactive options for their customers. All of this activity helps to build and strengthen the long-term relationships of customers with the company.
Marketing objectives: the goals set for the marketing department to help the business achieve its overall objectives.
Marketing strategy: A marketing strategy is a long-term plan established for achieving marketing objectives.
The long-term objectives of the company will have a significant impact on both the marketing objectives and marketing strategy adopted. A business with clear short-term profit targets will focus on maximising sales at the highest prices possible. In contrast, a business with longer-term objectives, which may include both profitability as well as the achievement of goals of social responsibility, may adopt a social marketing approach.
Examples of marketing objectives include:
To be effective, marketing objectives should:
Why marketing objectives are important:
Marketing objectives explained with examples
Market segmentation: The process of splitting a market into distinct groups of buyers in order to better meet their needs.
The main methods of market segmentation are based on demographic, geographic and psychographic factors.
Advantages to market segmentation:
Disadvantages to market segmentation:
Market segmentation explained
Market segmentation variables
Market segment: A sub-group of a whole market in which consumers have similar characteristics.
Market segmentation: Identifying different segments within a market and targeting different products or services to them.
Consumer profile: A quantified picture of consumers of a firm’s products, showing proportions of age groups, income levels, location, gender and social class.
Segmentation is sometimes referred to as differentiated marketing. Instead of trying to sell just one product to the whole market as in mass marketing, different products are targeted at different segments. This is a form of niche marketing. To be effective, firms must research and analyse the total market carefully to identify the specific consumer groups or segments that exist within it.
Some examples of market segmentation:
Sometimes firms only market their goods or services to one segment and deliberately do not aim to satisfy other segments. Gap is a clothing retailer that aims only at the youth market, Nike shoes are only for sports use and Coutts Bank only offers banking services to the seriously rich. These businesses make a virtue out of concentrating on one segment and developing an image and brand that suits that segment.
Identifying different consumer groups
Successful segmentation requires a business to have a very clear picture of the consumers in the target market it is aiming to sell in. This is called the consumer profile.
The main characteristics of consumers contained in a consumer profile are income levels, age, gender, social class and region. Marketing mix decisions need to be appropriate for the consumer profile of the target market.
A well-targeted product will need less advertising and promotional support than one which does not really meet the needs of the consumers that it is aimed at.
Target market: The market segment that a particular product is aimed at.
Markets may be segmented in a number of different ways. The three commonly used bases for segmentation are shown below:
Before targeting a niche market, businesses often analyse consumers’ perceptions of existing brands. This is called positioning the product by using a technique such as product mapping.
Positioning: The place that a brand occupies in the minds of the customers and how it is distinguished from the products of the competitors and different from the concept of brand awareness.
In order to position products or brands, companies may emphasise the distinguishing features of their brand (what it is, what it does and how, etc.) or they may try to create a suitable image (inexpensive or premium, utilitarian or luxurious, entry-level or high-end, etc.) through the marketing mix. Once a brand has achieved a strong position, it can become difficult to reposition it.
Positioning is one of the most powerful marketing concepts. Originally, positioning focused on the product and grew to include building a product's reputation and ranking among competitor's products. Primarily, positioning is about the place a brand occupies in the mind of its target audience. Positioning is now a regular marketing activity or strategy. A national positioning strategy can often be used, or modified slightly, as a tool to accommodate entering into foreign markets.
Positioning, segmentation and differentiation
Positioning vs Differentiation. Positioning is referred to acquiring a space in the mind of the customer. Differentiation is a marketing strategy companies use to make their product unique to stand out from competitors. Positioning is a technique used by all companies based on specific criteria.
Positioning maps show where existing products and brands are positioned in the market so that the firm can decide where they would like to place (position) their product.
Product differentiation (or simply differentiation) is the process of distinguishing a product or service from others, to make it more attractive to a particular target market. This involves differentiating it from competitors' products as well as a firm's own products.
Product differentiation is a marketing strategy designed to distinguish a company's products or services from the competition. Successful product differentiation involves identifying and communicating the unique qualities of a product or company while highlighting the distinct differences between that product or company and its competitors. Product differentiation goes hand in hand with developing a strong unique selling point so that a product or service is attractive to a target market or audience.
If successful, product differentiation can create a competitive advantage for the business that produces the product and ultimately build brand awareness. Examples of differentiated products might include the fastest high-speed Internet service or the longest range electric vehicle on the market.
Successful differentiation enables a company to achieve a competitive advantage over other companies offering similar product substitutes. It is an essential marketing process that is of vital economic importance to a business.
The product differentiation process may be as simple as redesigning of packaging to introducing a brand new functional feature in a product. The different factors through which the process is implemented include:
Types of product differentiation:
Advantages of product differentiation
Provides financial benefits. Product differentiation is financially advantageous to a company. It provides a reason for consumers as to why their product is worth investing in, as opposed to all the other substitute products available in the market. A successful differentiation campaign boosts sales for a company by a significant margin and gives it a competitive advantage in the market as to why they deserve a consumer’s investment more than the others.
Helps achieve a higher price point. In addition, product differentiation helps a company operate at a higher price point just because of that additional benefit or feature introduced in a product. When that one distinct feature or difference introduced in the product makes it better than its substitutes, consumers more often than not perceive it to be worth the increased price.
Promotes brand loyalty. Another implication of product differentiation is that very often, it brings brand loyalty into the picture. When a company efficiently differentiates its products, and a few essential products stand out, it usually brings out brand loyalty on the consumer’s part. This is because once a consumer is satisfied with a few products of a brand, they tend to just start buying other products from that one particular brand. The consumer believes that the company’s other products are as good and stand out just as much as the ones they use.
Essential statement: Successful differentiation enables an organisation and its products to stand out from the competition which, in turn, boosts sales volumes and relatively high prices can be sustained. Increased unit sales at higher prices increases profitability, justifying the expenses associated with developing differentiation such as using higher quality inputs, research and development programmes, promotion, etc.
Unique selling point
Unique selling point/proposition (USP): Differentiating factor that makes a company’s product unique, designed to motivate customers to buy.
Unless a business can pinpoint what makes its product unique in a world of homogeneous competitors, its sales efforts will not be targeted effectively. Customers are often attracted towards goods or services that offer a distinctive image, service, feature or performance. Establishing a USP is about differentiating a company from its competitors.
USPs can be based on any aspect of the marketing mix. For example:
Unique selling point explained
Niche marketing: Niche marketing targets specific and well-defined market segments (i.e., niche markets). Concentrating all marketing efforts on a small but specific and well defined segment of the population.
Niches do not 'exist' but are 'created' by identifying needs, wants, and requirements that are being addressed poorly or not at all by other firms, and developing and delivering goods or services to satisfy them.
As a strategy, niche marketing is aimed at being a big fish in a small pond instead of being a small fish in a big pond.
Mass marketing: Mass marketing is an attempt to appeal to an entire market with one basic marketing strategy using mass distribution and mass media.
It is also called undifferentiated marketing because this is a strategy that ignores targeting individual market segments. Different market segments are targeted with the same blanket approach (for example, a television promotion will reach many different market segments), usually to maximise sales volume.
Most businesses have various targeting strategies, often combining mas and niche marketing strategies.