Strategic marketing planning – a brief overview

 22 2 Strategic marketing planning – a brief overview For those readers totally familiar with strategic marketing planning, please proceed to Chapter 3, although we do recommend that readers spend time on Chapter 2. Summary In order to explore the complexities of developing a winning marketing strategy plan, this chapter is written in three parts. The first describes the strategic marketing planning process itself and the key steps within it. The second part provides guidelines for the marketer that will ensure that the input to the marketing plan is customer focused and considers the strategic dimension of all of the relationships the organization has with its business environment. The third part provides 12 guidelines for world-class marketing. 2.1 Introduction Research into the efficacy of formalized marketing planning has shown that marketing planning can make a significant contribution to commercial success. The main effects within organizations are: ● the systematic identification of emerging opportunities and threats; STRATEGIC MARKETING PLANNING 23  ● ● ● ● ● ● ● ● preparedness to meet change; the specification of sustainable competitive advantage; improved communication among executives; reduction of conflicts between individuals and departments; the involvement of all levels of management in the planning process; more appropriate allocation of scarce resources; consistency of approach across the organization; a more market-focused orientation across the organization. However, although it can bring many benefits, a strategic marketing plan is mainly concerned with competitive advantage – that is to say, establishing, building, defending and maintaining it. In order to be realistic, it must take into account the organization’s existing competitive position, where it wants to be in the future, its capabilities and the competitive environment it faces. This means that the marketing planner must learn to use the various available processes and techniques that help in making sense of external trends and in understanding the organization’s traditional ways of responding to these. However, this poses the problem regarding which are the most relevant and useful tools and techniques, for each has strengths and weaknesses and no individual concept or technique can satisfactorily describe and illuminate the whole picture. As with a jigsaw puzzle, a sense of unity emerges only as the various pieces are connected together. The links between strategy and performance have been the subject of detailed statistical analysis by the Strategic Planning Institute. The Profit Impact of Market Strategy (PIMS) project identified, from 2,600 businesses, six major links. From this analysis, principles have been derived for the selection of different strategies according to industry type, market conditions and the competitive position of the company. However, not all observers are prepared to take these conclusions at face value. Like strategy consultants Lubatkin and Pitts, who believe that all businesses are unique, they are suspicious that something as critical as competitive advantage can be the outcome of a few specific formulae. For them, the PIMS perspective is too mechanistic and glosses over the complex managerial and organizational problems that beset most businesses. What is agreed, however, is that strategic marketing planning presents a useful process by which an organization formulates its strategies, providing it is adapted to its environment. 2.2 Positioning marketing planning with marketing In 2003, a Cranfield doctoral thesis (Smith, 2003) proved a direct link between organizational success and marketing strategies that conform to what previous  24 MARKETING ACCOUNTABILITY scholars have agreed constitutes strategy quality, which was shown to be independent of variables such as size, sector, market conditions and so on. This thesis linked superior performance to strategies with the following qualities: ● ● ● ● ● ● ● ● ● ● homogeneous market segment definition; segment-specific propositions; strategy uniqueness; strength leverage and weakness minimization; creation of internal and external synergies; provision of tactical guidance; alignment to objectives; alignment to market trends; appropriate resourcing; clear basis of competition. Let us first, however, position strategic marketing planning firmly within the context of marketing itself. Marketing is a process for: defining markets; quantifying the needs of the customer groups (segments) within these markets; determining the value propositions to meet these needs; communicating these value propositions to all those people in the organization responsible for delivering them and getting their buy-in to their role; playing an appropriate part in delivering these value propositions to the chosen market segments; and monitoring the value actually delivered. For this process to be effective, organizations need to be consumer/customer driven. A map of this process is shown in Figure 2.1. This process is clearly cyclical, in that monitoring the value delivered will update the organization’s understanding of the value that is required by its customers. The cycle is predominantly an annual one, with a marketing plan documenting the output from the ‘Understand value’ and ‘Determine value proposition’ processes, but equally changes throughout the year may involve fast iterations around the cycle to respond to particular opportunities or problems. It is well known that not all of the value-proposition-delivering processes will be under the control of the marketing department, whose role varies considerably between organizations. The marketing department is likely to be responsible for the first two processes, ‘Understand value’ and ‘Determine value proposition’, although even these need to involve numerous functions, albeit coordinated by specialist marketing personnel. The ‘Deliver value’ process is the role of the whole company, including, for example, product development, manufacturing, purchasing, sales promotion, direct mail, distribution, sales and customer service. The marketing department will also be responsible for monitoring the effectiveness of the value delivered. The various choices made during this marketing process are constrained and informed not just by the outside world but also by the organization’s asset base. STRATEGIC MARKETING PLANNING 25  Define markets and understand value Monitor value Asset base Determine value proposition Deliver value Figure 2.1 Map of the marketing process Whereas an efficient new factory with much spare capacity might underpin a growth strategy in a particular market, a factory running at full capacity would cause more reflection on whether price should be used to control demand, unless the potential demand warranted further capital investment. As well as being influenced by physical assets, choices may be influenced by financial, human resources, brand and information technology assets, to name just a few. Thus, it can be seen that the first two boxes are concerned with strategic marketing planning processes (in other words, developing market strategies), whilst the third and fourth boxes are concerned with the actual delivery in the market of what was planned and then measuring the effect. Input to this process will commonly include: ● the corporate mission and objectives, which will determine which particular markets are of interest; ● external data such as market research; ● internal data that flow from ongoing operations. Also, it is necessary to define the markets the organization is in, or wishes to be in, and how these divide into segments of customers with similar needs. The choice of markets will be influenced by the corporate objectives as well as the asset base. Information will be collected about the markets, such as the market’s size and growth, with estimates for the future. The map is inherently cross-functional. ‘Deliver value proposition’, for example, involves every aspect of the organization, from new product development through inbound logistics and production to outbound logistics and customer service. The map represents best practice, not common practice. Many aspects of the map are not explicitly addressed by well-embedded processes, even in sophisticated companies.  26 MARKETING ACCOUNTABILITY Having put marketing planning into the context of marketing and other corporate functions, we can now turn specifically to the marketing planning process and how it should be done. We are, of course, referring specifically to the ‘Determine value proposition’ box in Figure 2.1. For the purpose of this book, it is important to understand that the ‘Monitor value’ box is not a separate step in strategy making, and what needs to be monitored and the frequency of measurement will depend totally on a deep understanding of the other three boxes, which we will now proceed to explain. 2.3 The marketing planning process Most managers accept that some kind of procedure for marketing planning is necessary. Accordingly they need a system that will help them to think in a structured way and also make explicit their intuitive economic models of the business. Unfortunately, very few companies have planning systems that possess these characteristics. However, those that do tend to follow a similar pattern of steps. Figure 2.2 illustrates the several stages that have to be gone through in order to arrive at a marketing plan. This illustrates the difference between the process of marketing planning and the actual plan itself, which is the output of the process, which is discussed later in this chapter. Each of the process stages illustrated in Figure 2.2 will be discussed in more detail in this chapter. The dotted lines joining up stages 5–8 are meant to indicate The strategic plan (output of the planning process) Mission statement Financial summary Market overview SWOT analysis Assumptions Marketing objectives and strategies Three-year forecast and budgets 1. Mission Phase One Goal setting 2. Corporate objectives 3. Marketing audit Phase Two Situation review 5. Assumptions 6. Marketing objectives and strategies 7. Estimate expected results Phase Three Strategy formulation 8. Identify alternative plans and mixes Measurement and review 4. SWOT analyses 9. Budget Phase Four Resource allocation and monitoring 10. First-year detailed implementation programme Figure 2.2 The 10 steps of the strategic marketing planning process STRATEGIC MARKETING PLANNING 27  the reality of the planning process, in that it is likely that each of these steps will have to be gone through more than once before final programmes can be written. 2.4 How formal should this process be? Although research has shown these marketing planning steps to be universally applicable, the degree to which each of the separate steps in the diagram needs to be formalized depends to a large extent on the size and nature of the company. For example, an undiversified company generally uses less formalized procedures, since top management tends to have greater functional knowledge and expertise than subordinates, and because the lack of diversity of operations enables direct control to be exercised over most of the key determinants of success. Thus, situation reviews, the setting of marketing objectives and so on are not always made explicit in writing, although these steps have to be gone through. In contrast, in a diversified company, it is usually not possible for top management to have greater functional knowledge and expertise than subordinate management; hence planning tends to be more formalized in order to provide a consistent discipline for those who have to make the decisions throughout the organization. Either way, there is now a substantial body of evidence to show that formalized planning procedures generally result in greater profitability and stability in the long term and also help to reduce friction and operational difficulties within organizations. Where marketing planning has failed, it has generally been because companies have placed too much emphasis on the procedures themselves and the resulting forecasts rather than on generating information useful to and consumable by management. Let us now look at the marketing planning process in more detail, starting with the mission statement. 2.4.1 Step 1 Mission statement Figure 2.2 shows that a strategic marketing plan should begin with a mission or purpose statement. This is perhaps the most difficult aspect of marketing planning for managers to master, because it is largely philosophical and qualitative in nature. Many organizations find their different departments, and sometimes even different groups in the same department, pulling in different directions, often with disastrous results, simply because the organization hasn’t defined the boundaries of the business and the way it wishes to do business. Here, we can see two levels of mission. One is a corporate mission statement; the other is a lower-level, or purpose, statement. But there is yet another level, as shown in the following summary: ● Type 1: ‘motherhood’ – usually found inside annual reports designed to ‘stroke’ shareholders, but otherwise of no practical use;  28 MARKETING ACCOUNTABILITY ● Type 2: the real thing – a meaningful statement, unique to the organization concerned, which ‘impacts’ on the behaviour of the executives at all levels; ● Type 3: a ‘purpose’ statement (or lower-level mission statement) – appropriate at the strategic business unit, departmental or product group level of the organization. The following box has an example of a meaningless, vapid, motherhood-type mission statement, which most companies seem to have. They achieve nothing, and it is difficult to understand why these pointless statements are so popular. Employees mock them, and they rarely say anything likely to give direction to the organization. We have entitled this example ‘The generic mission statement’, and such statements are to be avoided. The generic mission statement Our organization’s primary mission is to protect and increase the value of its owners’ investments while efficiently and fairly serving the needs of its customers. [Name of organization] seeks to accomplish this in a manner that contributes to the development and growth of its employees, and to the goals of countries and communities in which it operates. The following should appear in a mission or purpose statement, which should normally run to no more than one page: ● Role or contribution: – profit (specify); or – service; or – opportunity seeker. ● Business definition – define the business, preferably in terms of the benefits you provide or the needs you satisfy rather than in terms of what you make. ● Distinctive competences – these are the essential skills/capabilities resources that underpin whatever success has been achieved to date. Competence can consist of the possession of one particular item or the possession of a number of skills compared with competitors. If, however, you could equally well put a competitor’s name to these ‘distinctive’ competences, then they are not distinctive competences. ● Indications for the future: – what the firm will do; – what the firm might do; – what the firm will never do. STRATEGIC MARKETING PLANNING 29  2.4.2 Step 2 Setting corporate objectives Corporate objectives usually contain at least the following elements: ● the desired level of profitability; ● business boundaries: – what kind of products will be sold to what kinds of markets (marketing), – what kinds of facilities will be developed (operations, R&D, information systems, distribution, etc), – the size and character of the labour force (personnel), – funding (finance); ● other corporate objectives, such as social responsibility, corporate image, stock market image, employer image, etc. Such a corporate plan, containing projected profit and loss accounts and balance sheets, being the result of the process described above, is more likely to provide long-term stability for a company than plans based on a more intuitive process and containing forecasts that tend to be little more than extrapolations of previous trends. This process is further summarized in Figure 2.3. Corporate Involves applying business planning to several different units of the business aggregate Business Involves the other resources that must be brought to bear on the identified markets Marketing Based on markets/ customers and products Figure 2.3 The role of marketing in the context of business and corporate planning  30 MARKETING ACCOUNTABILITY 2.4.3 Step 3 The marketing audit Any plan will be only as good as the information on which it is based, and the marketing audit is the means by which information for planning is organized. There is no reason why marketing cannot be audited in the same way as accounts, in spite of its more innovative, subjective nature. A marketing audit is a systematic appraisal of all the external and internal factors that have affected a company’s commercial performance over a defined period. Given the growing turbulence of the business environment and the shorter product life cycles that have resulted, no one would deny the need to stop at least once a year at a particular point in the planning cycle to try to form a reasoned view of how all the many external and internal factors have influenced performance. Sometimes, of course, a company will conduct a marketing audit because it is in financial trouble. At times like these, management often attempts to treat the wrong symptoms, most frequently by reorganizing the company. But such measures are unlikely to be effective if there are more fundamental problems that have not been identified. Of course, if the company survived for long enough, it might eventually solve its problems through a process of elimination. Essentially, though, the argument is that the problems have first to be properly defined. The audit is a means of helping to define them. 2.4.3.1 Two kinds of variable Any company carrying out an audit will be faced with two kinds of variable. There is the kind over which the company has no direct control, for example economic and market factors. Second, there are those over which the company has complete control, the operational variables, which are usually the firm’s internal resources. This division suggests that the best way to structure an audit is in two parts, external and internal. Table 2.1 shows areas that should be investigated under both headings. Each should be examined with a view to building up an information base relevant to the company’s performance. Many people mistakenly believe that the marketing audit should be some kind of final attempt to define a company’s marketing problems or, at best, something done by an independent body from time to time to ensure that a company is on the right track. However, many highly successful companies, as well as using normal information and control procedures and marketing research throughout the year, start their planning cycle each year with a formal, audit-type process of everything that has had an important influence on marketing activities. Certainly, in many leading consumer goods companies, the annual self-audit approach is a tried-and-tested discipline. Where relevant, the marketing audit should contain life cycles for major products and for market segments, for which the future shape will be predicted using the audit information. Also, major products and markets should be plotted on some kind of matrix to show their current competitive position. STRATEGIC MARKETING PLANNING 31  Table 2.1 Conducting an audit External audit Internal audit Business and economic environment Own company Economic political, fiscal, legal, social, Sales (total, by geographical location, by cultural, technological industrial type, by customer, by product) Intra-company Market shares The market: total market, size, growth and trends (value volume) Profit margins, costs Market characteristics, developments and trends; products, prices, physical distribution, channels, customers, consumers, communication, industry practices variables, product management, price, distribution, promotion Marketing information research Competition Marketing mix operations and resources Major competitors Key strengths and weaknesses Size Market share coverage Market standing and reputation Production capabilities Distribution policies Marketing methods Extent of diversification Personnel issues International links Profitability The next question is: what happens to the results of the audit? Some companies consume valuable resources carrying out audits that produce very little in the way of results. The audit is simply a database, and the task remains of turning it into intelligence, that is, information essential to decision making. A market overview, which appears prominently in the actual strategic marketing plan, should spell out clearly:  32 MARKETING ACCOUNTABILITY ● ● ● ● what the market is; how it works; what the key decision-making points are; what the segments are. Market definition is fundamental to success and must be made in terms of need sets rather than in product/service terms. Thus, Gestetner failed by defining its markets as ‘duplicators’, and IBM almost failed by defining its market as ‘mainframes’. Accordingly, a pension is a product, not a market, as many other products can satisfy the same or similar needs. Table 2.2 lists hypothetical markets in the financial services sector. Figures 2.4 and 2.5 show the marketing books market in the UK. The first shows the market ‘mapped’ solely as marketing books. The second shows the market Table 2.2 Some market definitions (personal market) Market Need (online) Emergency cash (‘rainy day’) Cash to cover an undesired and unexpected event (often the loss of/damage to property) Future event planning Schemes to protect and grow money that are for anticipated and unanticipated cash calling events (eg car replacement/repairs, education, weddings, funerals, health care) Asset purchase Cash to buy assets they require (eg car purchase, house purchase, once-in-a-lifetime holiday) Welfare contingency The ability to maintain a desired standard of living (for self and/or dependants) in times of unplanned cessation of salary Retirement income The ability to maintain a desired standard of living (for self and/or dependants) once the salary cheques have ceased Wealth care and building The care and growth of assets (with various risk levels and liquidity levels) Day-to-day money management Ability to store and readily access cash for day-to-day requirements Personal finance protection and security from motor vehicle incidents Currently known as car insurance Publishers Resellers Consumers ButterworthHeinemann Booksellers, chains 30%, £3.0m Working professionals £3m Prentice Hall Booksellers, specialists 20%, £2.0m Postgrads/ execs £3.75m Wiley Booksellers, other 7%, £0.7m Academics £1m Library suppliers 7%, £0.7m Libraries £1m Macmillan Internet booksellers 1%, £0.1m Low-level students £1m Consultancies Specialist resellers Not booksellers 20%, £2.0m Authors £0.25m Others Book clubs and direct marketing 14%, £1.4m Total £10m Internet specialists 1%, £0.1m BPP Distributors Wholesalers’ eg Gardner & Bertram £3.6m 33  Figure 2.4 Market map for marketing books in the UK £10m  34 Knowledge creation/authoring Selection Packaging Book publishers Distribution Consumers Needs Portals General business Working professionals Basic business education Direct purchase online Postgrads/ execs Job skills development eg MBA Online bookstore Academics Small skills eg short courses Online content databases eg FT profile Libraries Up-to-date books Low-level students Basic business education Authors Publicity recognition Corporate trainers Small skills eg presentation Business schools Research institutes Journalists S/W package houses eg MPC Journal/magazine publishers eg HBR Consultants E-colleges Professionals Conference/report specialists eg SI FT knowledge Figure 2.5 Expanded market map for knowledge promulgation STRATEGIC MARKETING PLANNING 35  mapped in terms of the broader market definition of knowledge promulgation, from which it can be seen that new competitors and distribution channels come into play. Thinking and planning like this certainly had a dramatic effect on the marketing strategy of the major publisher involved. Figure 2.6 is a generic market map, which shows how a market works from suppliers to users, and, like a balance sheet, it must ‘balance’, in the sense that, if 5 million radiators are made or imported, 5 million radiators must be distributed, 5 million radiators must be installed, and the decision about which radiators are to be installed must be made by someone. It is the purpose of the market map to spell all this out quantitatively. It is at key decision points that market segmentation should take place. A segment is a group of customers or consumers that share the same (or approximately the same) needs. This step is crucial, for it is upon the key segments from the market map that SWOT analyses should be completed. Market segmentation is crucial for success in markets, so this topic is explained in detail in Chapter 6. 2.4.4 Step 4 SWOT analyses The only remaining question is: what happens to the results of the audit? Some companies consume valuable resources carrying out audits that bring very little by way of actionable results. Indeed, there is always the danger that, at the audit stage, insufficient attention is paid to the need to concentrate on analysis that determines which trends and developments will actually affect the company. Whilst the checklist demonstrates the completeness of logic and analysis, the people carrying out the audit should discipline themselves to omit from their audits all the information that is not central to the company’s marketing problems. Thus, inclusion of research reports, or overdetailed sales performance histories by product that lead to no logical actions whatever, only serve to rob the audit of focus and reduce its relevance. Since the objective of the audit is to indicate what a company’s marketing objectives and strategies should be, it follows that it would be helpful if some format could be found for organizing the major findings. One useful way of doing this is in the form of a number of SWOT analyses. A SWOT is a summary of the audit under the headings of internal strengths and weaknesses as they relate to external opportunities and threats. A SWOT should be conducted for each segment that is considered to be important in the company’s future. These SWOT analyses should, if possible, contain just a few paragraphs of commentary focusing on key factors only. They should highlight  36 vol/ val % N N vol/ val % vol/val % vol/val % N vol/val % Local distributors N Regional distributors National distributors N vol/ val % Pricelist retailers National builders N Local builders N Private companies N Local government users N Domestic users vol/val % N Contractors vol/val % Department vol/val % retailers vol/val % vol/val % vol/val % vol/val % N vol/val % N UK sales Other retailers vol/val % N Sheds vol/val % vol/val % N = Number % = Your share Figure 2.6 Generic market map vol/val % vol/val % STRATEGIC MARKETING PLANNING 37  internal differential strengths and weaknesses vis-à-vis competitors and key external opportunities and threats. A summary of reasons for good or bad performance should be included. They should be interesting to read, contain concise statements, include only relevant and important data, and give greater emphasis to creative analysis. To summarize, carrying out a regular and thorough marketing audit in a structured manner will go a long way towards giving a company a knowledge of the business, trends in the market, and where value is added by competitors, as the basis for setting objectives and strategies. 2.4.5 Step 5 Assumptions Let us now return to the preparation of the marketing plan. If we refer again to the marketing planning process, and have completed our marketing audit and SWOT analyses, assumptions now have to be written. There are certain key determinants of success in all companies about which assumptions have to be made before the planning process can proceed. It is really a question of standardizing the planning environment. For example, it would be no good receiving plans from two product managers, one of whom believed the market was going to increase by 10 per cent, while the other believed the market was going to decline by 10 per cent. An example of assumptions might be: ‘With respect to the company’s industrial climate, it is assumed that: ● Industrial overcapacity will increase from 105 per cent to 115 per cent as new industrial plants come into operation. ● Price competition will force price levels down by 10 per cent across the board. ● A new product in the field of x will be introduced by our major competitor before the end of the second quarter.’ Assumptions should be few in number and, if a plan is possible irrespective of the assumptions made, then the assumptions are unnecessary.  38 MARKETING ACCOUNTABILITY 2.4.6 Step 6 Marketing objectives and strategies The next step in marketing planning is the writing of marketing objectives and strategies, the key to the whole process. An objective is what you want to achieve. A strategy is how you plan to achieve your objectives. Thus, there can be objectives and strategies at all levels in marketing. For example, there can be advertising objectives and strategies, and pricing objectives and strategies. However, the important point to remember about marketing objectives is that they are about products and markets only. Common sense will confirm that it is only by selling something to someone that the company’s financial goals can be achieved, and that advertising, pricing, service levels and so on are the means (or strategies) by which we might succeed in doing this. Thus, pricing objectives, sales promotion objectives, advertising objectives and the like should not be confused with marketing objectives. Marketing objectives are simply about one, or more, of the following: ● ● ● ● existing products for existing markets; new products for existing markets; existing products for new markets; new products for new markets. They should be capable of measurement; otherwise they are not objectives. Directional terms such as ‘maximize’, ‘minimize’, ‘penetrate’, ‘increase’, etc are acceptable only if quantitative measurement can be attached to them. Measurement should be in terms of some, or all, of the following: sales volume; sales value; market share; profit; and percentage penetration of outlets (for example, to have 30 per cent of all retail outlets stocking our product by year 3). Marketing strategies are the means by which marketing objectives will be achieved and generally are concerned with the four Ps, as follows: ● product: the general policies for product deletions, modifications, additions, design, branding, positioning, packaging, etc; ● price: the general pricing policies to be followed by product groups in market segments; ● place: the general policies for channels and customer service levels; ● promotion: the general policies for communicating with customers under the relevant headings, such as advertising, sales force, sales promotion, public relations, exhibitions, direct mail, etc. STRATEGIC MARKETING PLANNING 39  2.4.7 Step 7 Estimate expected results, and Step 8 Identify alternative plans and mixes Having completed this major planning task, it is normal at this stage to employ judgement, analogous experience, field tests and so on to test out the feasibility of the objectives and strategies in terms of market share, costs, profits and so on. It is also normally at this stage that alternative plans and mixes are considered, if necessary. 2.4.8 Step 9 The budget In a strategic marketing plan, these strategies would normally be costed out approximately and, if not practicable, alternative strategies would be proposed and costed out until a satisfactory solution could be reached. This would then become the budget. In most cases, there would be a budget for the full three years of the strategic marketing plan, but there would also be a very detailed budget for the first year of the plan, which would be included in the one-year operational plan. It will be obvious from all of this that not only does the setting of budgets become much easier but the resulting budgets are more likely to be realistic and related to what the whole company wants to achieve rather than just one functional department. The problem of designing a dynamic system for budget setting, rather than the ‘tablets of stone’ approach, which is more common, is a major challenge to the marketing and financial directors of all companies. The most satisfactory approach would be for a marketing director to justify all marketing expenditure from a zero base each year against the tasks he or she wishes to accomplish. A little thought will confirm that this is exactly the approach recommended in this chapter. If these procedures are followed, a hierarchy of objectives is built up in such a way that every item of budgeted expenditure can be related directly back to the initial corporate financial objectives. For example, if sales promotion is a major means of achieving an objective in a particular market, when sales promotional items appear in the programme each one has a specific purpose that can be related back to a major objective. Doing it this way ensures not only that every item of expenditure is fully accounted for as part of a rational, objective and task approach, but also that when changes have to be made during the period to which the plan relates these changes can be made in such a way that the least damage is caused to the company’s longterm objectives. The incremental marketing expense can be considered to be all costs that are incurred after the product leaves the factory, other than costs involved in physical distribution, the costs of which usually represent a discrete subset.  40 MARKETING ACCOUNTABILITY There is, of course, no textbook answer to problems relating to questions such as whether packaging should be a marketing or a production expense, and whether some distribution costs could be considered to be marketing costs. For example, insistence on high service levels results in high inventory carrying costs. Only common sense will reveal workable solutions to issues such as these. Under price, however, any form of discounting that reduces the expected gross income, such as promotional discounts, quantity discounts, royalty rebates and so on, as well as sales commission and unpaid invoices, should be given the most careful attention as incremental marketing expenses. The most obvious incremental marketing expenses will occur, however, under the heading of promotion, in the form of advertising, sales salaries and expenses, sales promotional expenditure, direct mail costs and so on. The important point about the measurable effects of marketing activity is that anticipated levels should be the result of the most careful analysis of what is required to take the company towards its goals, while the most careful attention should be paid to gathering all items of expenditure under appropriate headings. The healthiest way of treating these issues is a zero-based budgeting approach. 2.4.9 Step 10 First-year detailed implementation programme In a one-year tactical plan, the general marketing strategies would be developed into specific sub-objectives, each supported by more detailed strategy and action statements. A company organized according to functions might have an advertising plan, a sales promotion plan, a pricing plan and so on. A product-based company might have a product plan, with objectives, strategies and tactics for price, place and promotion as necessary. A market- or geographically based company might have a market plan, with objectives, strategies and tactics for the four Ps as necessary. Likewise, a company with a few major customers might have customer plans. Any combination of the above might be suitable, depending on circumstances. A written strategic marketing plan is the backdrop against which operational decisions are taken. Consequently, too much detail should be avoided. Its major function is to determine where the company is, where it wants to go and how it can get there. It should be distributed on a ‘need to know’ basis only. It should be used as an aid to effective management. It cannot be a substitute for it. 2.5 What should appear in a strategic marketing plan? A written marketing plan is the backdrop against which operational decisions are taken. STRATEGIC MARKETING PLANNING 41  The following should appear in a strategic marketing plan: 1. Start with a mission statement. 2. Here, include a financial summary that illustrates graphically revenue and profit for the full planning period. 3. Now do a market overview including a market map: Has the market declined or grown? How does it break down into segments? What is your share of each? Keep it simple. If you do not have the facts, make estimates. Use life cycles, bar charts and pie charts to make it all crystal clear. 4. Now identify the key segments and do a SWOT analysis for each one: outline the major external influences and their impact on each segment. List the key factors for success. These should be fewer than five. Give an assessment of the company’s differential strengths and weaknesses compared with those of its competitors. Score yourself and your competitors out of 10 and then multiply each score by a weighting factor for each critical success factor (eg CSF 1 = 60, CSF 2 = 25, CSF 3 = 10, CSF 4 = 5). 5. Make a brief statement about the key issues that have to be addressed in the planning period. 6. Summarize the SWOTs using a portfolio matrix in order to illustrate the important relationships between your key products and markets. 7. List your assumptions. 8. Set objectives and strategies. 9. Summarize your resource requirements for the planning period in the form of a budget. Consequently, too much detail should be avoided. The marketing plan’s major function is to determine where the company is, where it wants to go and how it can get there. It lies at the heart of a company’s revenue-generating activities, such as the timing of the cash flow and the size and character of the labour force. What should actually appear in a written strategic marketing plan is shown in the list above. This strategic marketing plan should be distributed only to those who need it, but it can be only an aid to effective management. It cannot be a substitute for it. It will be obvious from the list above that not only does budget setting become much easier and more realistic, but the resulting budgets are more likely to reflect what the whole company wants to achieve, rather than just one department. The problem of designing a dynamic system for setting budgets is a major challenge to the marketing and financial directors of all companies. The most satisfactory approach would be for a marketing director to justify all marketing expenditure from a zero base each year against the tasks to be accomplished. If these procedures are followed, a hierarchy of objectives is built in such a way that every item of budgeted expenditure can be related directly back to the initial financial objectives.  42 MARKETING ACCOUNTABILITY For example, if sales promotion is a major means of achieving an objective, when a sales promotion item appears in the programme it has a specific purpose that can be related back to a major objective. Thus every item of expenditure is fully accounted for. Marketing expense can be considered to be all costs that are incurred after the product leaves the ‘factory’, apart from those involved in physical distribution. When it comes to pricing, any form of discounting that reduces the expected gross income – such as promotional or quantity discounts, overrides, sales commission and unpaid invoices – should be given the most careful attention as marketing expenses. The most obvious marketing expenses will occur, however, under the heading of promotion, in the form of advertising, sales salaries and expenses, sales promotion and direct mail costs. The important point about the measurable effects of marketing activity is that anticipated levels should result from careful analysis of what is required to take the company towards its goals, while the most careful attention should be paid to gathering all items of expenditure under appropriate headings. The healthiest way of treating these issues is through zero-based budgeting. We have just described the strategic marketing plan and what it should contain. The tactical marketing plan layout and content should be similar, but the detail is much greater, as it is for one year only. 2.6 How the marketing planning process works As a basic principle, strategic marketing planning should take place as near to the marketplace as possible in the first instance, but such plans should then be reviewed at higher levels within an organization to see what issues may have been overlooked. It has been suggested that each manager in the organization should complete an audit and SWOT analysis on his or her own area of responsibility. The only way that this can work in practice is by means of a hierarchy of audits. The principle is simply demonstrated in Figure 2.7. This figure illustrates the principle of auditing at different levels within an organization. The marketing audit format will be universally applicable. It is only the detail that varies from level to level and from company to company within the same group. Figure 2.8 illustrates the total corporate strategic and planning process. This time, however, a time element is added, and the relationship between strategic planning briefings, long-term corporate plans and short-term operational plans is clarified. It is important to note that there are two ‘open-loop’ points on this figure. These are the key times in the planning process when a subordinate’s views and findings should be subjected to the closest examination by his or her superior. It is by taking these opportunities that marketing planning can be transformed into the critical and creative process it is supposed to be rather than the dull, repetitive ritual it so often turns out to be.