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Chapter 15 Marketing planning Understand the contexts and types of marketing planning in hospitality organizations Describe a generic process for marketing planning Carry out the research needed to develop a strategic marketing plan Explain how analytical tools are used to evaluate a hospitality business’s current and potential situation Recognize the limitations of marketing planning and the importance of contingency planning Planning is widespread in businesses of all sizes Larger companies have formalized planning processes, smaller companies perform planning essentials A plan sets out what a company wants to achieve and how it is going to achieve it The essence of planning is a goal with accompanying strategies and tactics The goal defines what the company wants to achieve The strategy and tactics set out how the goal will be achieved A marketing plan sets out the marketing objectives that a company wants to achieve and the strategy and tactics that will be used to reach the objectives Corporate marketing planning Complex hospitality organizations produce strategic marketing plans at the highest corporate level to make strategic decisions (which geographic markets to enter, which hospitality formats to offer in those markets, market entry strategies) Decisions are implemented at divisional level Divisional marketing planning Focuses on goals of major division in hospitality company A division is profit centre with core branded businesses, led by management team who produce marketing plans for each brand to deliver sales, profit, growth goals Divisions are responsible to Corporate Executives and set brand standards for units Unit marketing planning Hospitality operational unit – a hotel or a restaurant Goals and strategies focus on implementing brand standards such as targeting, positioning and developing strong pre-encounter, encounter and post-encounter marketing mixes Strategic marketing plans (SMP) Focus on long-term goals (3- to 5-years) Objectives to build market share, building yield and growing revenues Strategic decisions on market segmentation, target markets and market positioning, and brand standards Tactical marketing plans (TMP) Operates short time-frame (1 year or less) TMP subordinate to SMP and operates within boundaries set by STP TMPs consist primarily of campaigns and events – unit or department Campaign is short term promotion Campaigns have carefully targeted and timed customer/prospect communications Vision, mission, values Situation audit Objectives STP Marketing mix Budgeting Implementation Controls Evaluation Leading hospitality companies develop vision statements, mission statements or sets of values These are statements about: what the organization is en route to becoming in 10 years or more (the vision statement) why the organization exists (the mission statement) how the organization shall act in relationships with its stakeholders, such as shareholders, customers, employees and the local community (the values statement) Many organizations have policies like these but merge them into a single generic mission statement that contains elements of all three Purpose to enable top management to provide: focus for the future direction of the company link with the company’s short- and medium-term objectives, and the long-term goals of the organization tool for communicating top management’s perception of the company’s future with its various stakeholders Mission statement can include: definition of broad scope of the business, the markets served, the products and services offered and the distinctive benefits provided by the organization to its customers summary of the distinctive competences the business has developed description of the desired market position vis-à-vis competitors clear statement about the company’s values Figure 15.1 Prêt à Manger’s mission statement Need to carry out research into the company, and its environment, to answer the question ‘where are we now?’ Should be written as brief factual statements covering key aspects of hospitality business Two sections of the situation audit are: internal audit external audit Key issues summarized in a SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis Assesses all aspects of the hospitality unit’s operations Aims to establish what the business is doing well – the strengths What parts of the business are performing poorly – the weaknesses Managers often can identify their business’s strengths and know their weaknesses; but difficulty is recognizing the difference between the symptoms of the problem (e.g. low food sales) and the cause of the problem (unpopular menu items, high prices, poor food production system) Identifying causes of the problem, actions taken to correct poor performance Strengths and weaknesses identified by vertical analysis (e.g. within business functions – finance, operations, marketing, human resources) or using marketing mix Boston Consulting Group (BCG) matrix analytical approach to assessing cash flow, based on relative market share and market growth for SBUs Star (high market growth/high relative market share): company needs to reinvest the cash generated to maintain brand’s position all cash generated by a star is reinvested in the star Cash cow (growth/high relative market share): cash cows generate cash and high profits because of economies of scale profits generated are reinvested by the parent company to fund development of question marks Question mark (high market growth/low relative market share): question marks are new products which require significant investment they use more cash than they generate if successful can turn into stars and ultimately into cash cows Dog (low market growth/low relative market share): dogs are businesses which have to be managed carefully dogs can be cash-neutral, but if making a loss need to be disposed of quickly dogs are not able to generate the profits and growth expected by major companies new owners (with different performance measures) might turn a dog into a satisfactory return Figure 15.2 BCG portfolio analysis – cash generated and cash used External environment includes all the factors over which the company has no control Purpose of an external audit is to identify: potential opportunities that can be exploited by the firm threats that might damage the business External factors are applicable to all companies operating in the same competitor set External influences can be classified: macro-environment micro-environment Macro-environment: includes major regional, national and global trends influencing business and society PESTE factors which influence the demand/supply in hospitality macro-environment analysis evaluates current and future PESTE factors to enable the hospitality business to adapt its operations to changes in the needs and wants of customers Micro-environment: includes external stakeholders and, most importantly, customers, competitors and suppliers local or regional factors influence microenvironment and impact upon hospitality business Key SWOT data emerges from the situation analysis Internal audit data reflect the strengths and weaknesses of marketing offers External audit presents potential opportunities and threats facing hospitality business The SWOT summarises key issues and helps to plan future objectives, strategies and tactics Strengths (internal) Opportunities (external) Weaknesses (internal) Threats (external) Objectives are statements that translate the hospitality company’s mission into easily understood targets regarding markets and products, sales, occupancy and the marketing mix Objectives provide answers to the question ‘where do we want to go?’ Objective setting is an essential step in the marketing planning process Companies that do not have objectives fail to provide managers and employees with a clear direction Objectives should be Specific, Measurable, Achievable, Realistic and achieved within set Timetable (SMART) SMART objectives provide managers with operational targets that measure performance using quantified metrics like money, percentages and numbers to be achieved by a given time period (month, year) Gap analysis is an extension of ‘where are we now?’ and ‘where are we going?’ Company has historic sales data and SWOT suggest what will happen to sales in the future Companies can find a ‘gap’ between where they want to be in terms of sales objectives and where a forecast based on the SWOT analysis tells them they will be Gap analysis helps by computing the size of the gap and suggesting measures to bridge gap Four alternative strategies for filling the ‘gap’ was developed into a matrix by Ansoff Figure 15.3 Gap analysis Market penetration strategy (existing markets/existing products) Aim is to grow the business by increasing sales of current offer to current target markets Market extension or development (new markets/existing products) Rolls out existing product to new markets Strategy can focus on growth within existing units, or expand number of properties in the group Product development (existing markets/new products) Strategy is to enhance product made to existing customers Hospitality operations are constantly looking for ways to increase customer satisfaction by improving the product offer Diversification (new markets/new products) Focus is on creating new products for new target customers Riskiest growth strategy because the company has no existing customer or product knowledge Figure 15.4 Ansoff or market/product mix Marketing strategies and marketing tactics are marketing mix decisions made by managers to achieve the agreed marketing objectives Strategies and tactics should deliver sales from the targeted customers (target market segments) against the identified competitors (market positioning) Two different approaches to construct the marketing mix part of a marketing plan: Each element of the marketing mix in unit discussed: product strategy, price strategy, distribution strategy, the marketing communications strategy Marketing mix for functional areas is considered: the marketing mix for the accommodation, the marketing mix for the restaurant operations, the marketing mix for the conference Companies need to create a budget for the implementation of their strategic and tactical marketing plans Budgets include two classes of data: forecast revenues and costs Costs attributable to marketing function are: market research expenses distribution (commissions to intermediaries) marketing communication activities sales team (salaries, travel costs, support materials and training) customer database management Effective marketing planning monitors and control the plan’s implementation Key concerns are no unacceptable variance between plan’s revenue targets and anticipated sales Five stages in control process: set SMART objectives establish reporting process to inform progress against targets monitor performance identify significant variations from target take corrective action Control measures include financial performance: sales, achieved room rate, occupancy and RevPAR; customer mix ratios changes in market share changes in brand awareness and brand image number of hits on the website, number of bookings (the conversion ratio from enquiries to bookings) Contingency planning recognizes that key assumptions may be incorrect Contingency plans are formulated on ‘what if?’ scenarios what would happen if a serious environmental incident affected our business? Only major risks are considered in contingency planning Contingency planning linked to crisis management and more important Marketing plans should include budget items for contingencies provides funds to take advantage of an unforeseen opportunity responds to a downturn in demand by increasing marketing activity Figure 15.5 Summary of marketing plan After conclusion of planning period, event or campaign, marketing team needs to evaluate results including: comparison of actual performance with the SMART objectives across all the areas of the business commentary explaining the reasons for variance provides useful information for the next marketing plan Companies repeat successfully tried-and-tested tactics of previous years and aim to learn from less effective activities Marketing is a continuous learning activity: cycle of forward-planning for next campaign implementing the current marketing action plan evaluating recent activity is carried out simultaneously Marketing planning provides hospitality companies with a structured approach to planning for the future Future is uncertain, environmental trends can be identified and evaluated Marketing planning improves the chances of survival and success Chan, B. (2003). ‘Sharing the experience’. Hospitality Magazine (HCIMA), pp. 18–19. McDonald, M. (1999). Marketing Plans. ButterworthHeineman. McDonald, M. (2008). Malcolm McDonald on Marketing Planning: Understanding Marketing Plans and Strategy Marketing Plans. Kogan Page.