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Market planning
Introduction
It is said that marketing is a soft skill, a pseudo science, and not core to the successful business enterprise.
That would make sense, were it not for the philosophical, spirited and driven individuals that define today's
corporate marketing clan.
Strategic market planning typically contains five concentrations; each element contributing to an iterative
process. The steps are generally known as:
1.
2.
3.
4.
5.
marketplace assessment,
segmentation,
business strategy development,
action plans, and
measurement/review and strategic alteration.
Marketplace assessment
The term environmental scanning is often used in context of marketplace assessment. As strategic business
units (SBUs) need to continually monitor both the macroenvironment forces (economic/demographic,
technological, legal/political and social/cultural) and microenvironment players (partners, competitors,
customers, suppliers and distribution channels), the term environmental scanning has emerged to explain
these practices. In fact, it is often the duty of the SBU to create a marketing intelligence team in order to
track competitive trends and developments.
A strengths, weaknesses, opportunities and threats (SWOT) analysis is commonly used to evaluate a
company and the competitive environment in which it operates. A SWOT analysis evaluates the strategic
position of a company by plotting its strengths and weaknesses (internal environment) against its
opportunities and threats (external environment). Strengths and weaknesses are to be identified in
comparison to the competition and in terms of value to the customer. Opportunities and threats on the other
hand should be seen as those (outside) environmental factors, today or anticipated, which could have
implications for the competitive position of the business.
Using SWOT analysis can, to varying degrees, influence which target markets a business will pursue. Such
decisions often use segmentation to fully determine those customer groups (segments) to actively pursue.
Marketplace segmentation
As the concept of a mass-market splinters into the emerging micromarkets of today, each with different
wants, needs, preferences, perceptions and buying criteria, market segmentation becomes a critical part of
market planning. Market segmentation refers to the technique used to identify the divergent nature of
markets. Segmentation can be defined as "(t)he identification of groups of individuals or organizations with
characteristics in common that have significant implications for the determination of marketing strategy" David Jobber, Principles and Practice of Marketing
The segmentation process begins with the understanding of those characteristics and requirements of
individuals that comprise a distinct market. Customers are then grouped into segments, according to these
characteristics and requirements. Identification of these segments can now be analyzed in light of the
implications they have upon development of marketing strategies. Once a target market has been selected
from your customer segments, identification of positioning concepts and development of value statements
should begin taking shape. Consumer product goods are masters of segmentation. Targeting the correct
messages to drinkers of Coke® vs. Diet Coke®, for example, requires precise market segmentation skills.
Segmentation is often considered one facet of what is called the STP formula: segmentation, targeting, and
positioning. Taken together, these elements make up the essence of strategic marketing.
The goal of segmentation is to identify strong predictors or influencers of buying behavior, and increase
targeting precision. There is no single way to segment markets; however, such segmentation usually
revolves around customer needs, identifying buying patterns, and includes sociodemographics and
geographics.
The processes of marketplace assessment and segmentation will often include some or all of the following
activities:
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analysis of marketplace,
determination of potential target opportunities,
determination of segmentation structure,
creation of the "Promise of Value", and
setting of vision and goals.
Once you have segmented your audience and identified a target market, energies should now be focused
inward, looking at one's own organization to determine the relative health of your portfolio. Companies
conduct such analysis to determine which strategies to use and resources to allocate in order to compete in
the chosen target market.
Portfolio analysis
The practice known as portfolio analysis may incorporate various models to evaluate the relative strengths
and weaknesses (sales potential) of each strategic business unit (SBU) in support of the division plan. One
well known business portfolio evaluation tool is the Boston Consulting Group's Growth-Share Matrix.
The Growth-Share Matrix plots market growth rate on the vertical axis and relative market share on the
horizontal axis. This matrix creates four zones depicting the relative attractiveness of a business at each
point in the product life cycle. An organization may plot each of their businesses within the zones of the
matrix to determine their relative health. Following this exercise, a company then determines which
objectives, strategies, and resources to allocate each individual business.
By plotting various businesses upon this Growth-Share Matrix, companies can determine the relative health
of their portfolios. Depending upon the location of each business when plotted on this matrix, the four basic
strategies to be pursued are build, hold, harvest, or divest.
It is important to note that the entire reason for SBU analysis is to identify the different potential objectives
and goals for each individual business. The process of portfolio analysis will often include some or all of the
following activities:
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direct competitive analysis,
select/prioritize investment opportunities,
review strategic positioning,
review financial analysis,
determine business design, and
determine business goals.
Following completion of your portfolio analysis, you will posess the sum of information necessary to start
forming business strategies and action plans.
Business strategies and action plans
It is safe to say that every business must tailor strategies to support the individual goals of that business.
That said, many look to marketing guru Michael Porter when thinking along strategic lines. Porter has
identified the three generic strategies for business development: overall cost leadership, differentiation, and
focus. Many others have tried to add to this list, and/or claim that you must now become a master in more
than one area to maintain competitive advantage.
A business seeking a strategy of overall cost leadership seeks to achieve the lowest costs in production and
development, to enter the market at a price lower than the competition, and to win large market share.
Differentiation strategy seeks to achieve superior quality and performance in a large portion of the market
and in an area that provides value to a large number of customers. In this example a company cultivates
strengths that give it a competitive advantage. The strategy that concentrates on a narrow market segment
or segments, is known as the focus strategy. Focus (niche) strategy adopters learn in great detail the needs
of a particular segment and perform cost leadership, or a form of differentiation, within a particular target
segment.
Those companies pursuing the same strategy targeted at the same segment or target market constitute,
according to Porter, a strategic group. The company which best executes this strategy will reap the greatest
profit. The lowest cost firm pursuing a low-cost strategy would therefore constitute the most successful
among the strategic group and would win the largest profit. Conversely, firms failing to pursue a clear
strategy, and seeking a middle-of-the-road approach, will fare the worst. Because strategic dimensions
require differing and often inconsistent ways of organizing a firm, middle-of-the-road pursuers may find
themselves not particularly effective at anything.
The essence of a successful strategy is effectiveness. That is to say that effective businesses are those
whose successful execution of tactics supports their business strategies and achieves the intended business
goals. In many cases a business may wish to compete in a particular market, because it is attractive and
growing, but may lack the critical skills necessary to be effective in that market. There is a growing
realization that companies may need to form strategic relationships if they hope to compete more effectively
in the future. Such relationships should seek to compliment and leverage each others capabilities, core
competencies, and resources to effectively increase their overall market profit potential.
This belief, coupled with a desire to strengthen our worldwide presence as the premier associate for
software developers (to include ASPs, ISPs, Web integrators and the like) has hastened IBM to successfully
orchestrate numerous strategic alliances. (Siebel, Financial Fusion, Ariba, Relavis, and Lawson are just a
few examples).
In such relationships, three elements have emerged as key to successful strategic alliances:
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strategic fit,
long term focus, and
flexibility.
In order to transform business strategies into successful marketing programs, companies must decide which
tactics, and in what combination, will best achieve the marketing objectives. This marketing-mix as it is
called, can be defined as: "The set of marketing tools that a business uses to pursue its marketing objectives
in the target market." Popularized by E. J. McCarthy, the four P's of the marketing-mix are product, price,
promotion, and place. Promotion refers to all the ways a business communicates the value of its products to
target markets (direct mail, advertising, public relations, direct and online marketing activities are just a few).
Many of these tactics or actions are conducted by the communications arm of an organization and are often
contained within the marketing communications plan element of the overall marketing plan.
Developing business strategies and action plans will often include some or all of the following activities:
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develop strategy and plan,
understand customer wants and needs,
determine customer buying behavior,
develop the value proposition,
develop marketing strategies (supporting key target markets), and
creation of tactical plans (supporting marketing strategies).
Measurement, assessment, and management
The final procedures in any marketing process consist of resource organization, implementation, and
management of the marketing plan. The first step is for the business to build a marketing organization
capable of implementing the marketing plan. As discussed earlier, this may require additional employees, reeducation or strategic alliances. It also requires senior management support and funding. To many
organizations this is a new and therefore transformational process that will take time. Appropriate metrics
and milestones must be set in place to assure progress is being made, and the right people need to be
involved at the right time throughout the process.
There will likely be surprises as well as disappointments as marketing plans are adjusted and implemented.
For this reason, there is a strong impetus placed upon alignment and optimization of business plans across
separate business entities.
Conclusion
Strategic market planning is an iterative process, reflecting continuous changes in both an organization
itself, and the competitive environment surrounding it. Therefore it can not be over emphasized that as
company strategies, environments, and market indicators change, so should the objectives, strategies and
tactics of any market planning process. Given the high level of cooperation and communication across an
organization in order to stay ahead of the curve, it is safe to say that a successful organization is one with
soul and depth. In the words of IBM's Thomas Watson, Jr., "(t)he basic philosophy, spirit and drive of an
organization have far more to do with its relative achievements than do technological or economic
resources, organizational structure, innovation and timing."
Sources
Kotler, Philip, Marketing Management, 9/E, Copyright 1997.
Reproduced by permission of Pearson Education, Inc.
Jobber, David, Principles and Practice of Marketing, 2/E, Copyright 1998.
Reproduced by permission of McGraw-Hill Publishing Company
Aaker, David A., Strategic Market Management, 5/E, Copyright 1998.
Reproduced by permission of John Wiley & Sons, Inc.