Marketing planning

Marketing is about taking decisions about the product, price, promotion and
place fit with the marketing objective, marketing budget and each other to
create an integrated marketing mix.
In addition, market research should have been undertaken and a time limit for
objectives to be met clearly communicated to the marketing department. This
process is referred to as marketing planning.

Marketing plan
The key contents of a typical marketing plan are -
->  purpose of the plan and the mission of the business
-> where the firm is now - situational analysis
-> where it aims to get to, in marketing terms
-> turning the strategy into the appropriate marketing tactics to be followed
-> the budget required to implement the plan effectively
-> executive summary and the time frame for implementation of the plan

Marketing plan - a detailed, fully researched written report on marketing

objectives and the marketing strategy to be used to achieve them.

Purpose and mission

The first part of the plan is to provide the reader with the necessary
information to understand the purpose of it - this includes background
information about the business including its mission statement and will be
particularly important if the audience for the plan is not familiar with the
company.

Situational analysis 
This part of the plan answers the question ‘where are we now?’
It is important to know current strengths,existing product range and market
shares, existing and potential competitors, consumer tastes and trends, the
state of the market the business operates in and the external problems and
opportunities. 
-> This can be time consuming as it will require extensive market research
and detailed analysis of quantitative data.
-> if situation analysis is not undertaken then the rest of the plan can be
completely misdirected.

Situation analysis should cover five main areas -

-> Current product analysis (not needed for new businesses)
-> target market analysis
-> competitor analysis
-> economic and political environment (PEST analysis)
-> SWOT analysis - strengths, weaknesses, opportunities and threats. 
Marketing objectives and strategies
Marketing objectives
This section looks at ‘Where do we want to be?’
-> All plans need a target to focus attention and to direct effect.
These targets should be specific, measurable and time limited.

Marketing objectives can be expressed in terms of total sales. by value or in

units, market share or sales growth rates and can also be expressed in
financial terms. These can then be broken down into more specific targets for
each section within the marketing department.
Targets can be established for -
-> number of new customers attracted to the firm's products
-> level of brand and advertising Awareness to be achieved
-> total number of new retailers signed up to sell the product
-> the proportion of each market segment that the company hopes to capture
By setting these measurable objectives the final review of the company's
marketing strategy can be conducted easily.

Marketing strategy 
Marketing strategy considers the overall approach to be taken by the
business. 

The final strategy depends upon

-> The company's mission and objectives
-> situational analysis
-> the resources of the business

Marketing-mix tactics 
Product - There should be a brief summary of the existing products and the
planned changes or additions to the new product range should be identified.
The development of the new product should be explained and the research
behind it outlined.

Price - Factors that should be considered while taking a prize decision are
costs, price elasticity, competitors prices and market conditions, etc.

Promotion - Promotional decisions will cover for Major areas - advertising,

sales promotion, Public Relations and personal selling. 

Place or distribution - Distribution is a broad concept that includes all

activities responsible for getting the product to the customer. This plan should
give details of the channels to be used, the range and number of outlets that
will sell the product. 

Marketing budget 
All marketing decisions have financial implications in the plan must give
details of: 
-> how much is required to put the market strategy and tactics into effect
-> the expected sales performance of the plan, to allow comparison between
marketing expenditure and expected sales

Executive summary and time scale

Reviewing the plan - and the marketing strategy 
This will be a crucial test of the effectiveness of the marketing plan and the
strategy it contains. There is also the marketing plan and any new strategy
needs to be collected and checked against duration objectives, if this strategy
appears not to be reaching the target set for it then an analysis of consumer
reaction could be undertaken and changes made to the overall plan.

Marketing planning - an evaluation 

There are three main benefits -
-> potential entrepreneurs will need to convince potential finance investors at
the business proposal is both sound and potentially profitable and a market
plan is one key component of a complete business plan.
-> specific marketing plans might also be needed to help introduce a strategy
that could determine the business's future success. A marketing plan should
greatly reduce the risk of failure if such new business directions were taken.
-> Planning provides direction and purpose to future marketing decisions that
everyone in the department and the organisation can understand and support.
Effective marketing plans are not constructed in isolation from other
departments. Integration of departments will have substantial benefits for the
whole business. 

Potential limitations 
-> Detailed marketing plans are costly and time consuming. small businesses
may not have the money of the skilled management to produce a professional
looking plan.
-> in a fast changing market the plant could become out of date before it is
even published and it will prohibit flexibility.
-> marketing managers may not want to change their plan after it is set and
their attachment to the plan may prevent them from seeing that unseen
changes in the external environment could require substantial evidence to the
plan. 

Elasticity 
Elasticity measures the responsiveness of demand for a product following a
change in its price.

Income elasticity of demand 

Income elasticity of demand - measures the responsiveness of demand for a
product following a changin consumer income. 
Income elasticity of demand = %change in demand/%change in income

Promotional elasticity of demand

Promotional elasticity of demand - measures the responsiveness of demand
for a product following a change in the amount spent on promoting it.
Promotional elasticity of demand = %change in demand/%change in
promotional spending.

If the change is greater than 1, then demand is said to be elastic or responsive

following a change in spending on promotion. If it’s less than 1, then the
demand is inelastic. 

Cross elasticity of demand  

Cross elasticity of demand - measures the responsiveness of demand for a
product following a change in the price of another product.
Cross elasticity of demand = %change in demand for good A/%change in
price of good B.

If the result is negative - the two goods are complementary to each other.
If the result is positive - the two goods are substitutes and competing. 

Evaluating these measures of elasticity 

These measures of elasticity should be analysed and acted on with caution.
They are not entirely reliable as the changes in sales may have been due to
other reasons. 

Marketing strategies and marketing objectives - getting the

focus right 
A marketing strategy needs to be clearly directed towards the marketing
objectives set for the company. 

The importance of an integrated market strategy

-> Marketing strategies cannot be devised or planned without essential input
from all other functional departments. A marketing team will need to
coordinate with finance, operations and human resources. 
-> The four elements of the marketing mix must be mutually supportive amd
integrated with each other.

New product development 

In many fast changing markers, there is a constant need to develop new
products.
New product development (NPD) - the design, creation and marketing of new
goods and services. 

For a new product to succeed it must -

-> have desirable features that consumers are prepared to pay for
-> be sufficiently different from other products to make it stand out
-> be marketed effectively to consumers

Seven stages in the process of new product development - 

1 Generate new ideas 

Ideas for products come from a variety of sources -
-> Company’s own research and development (R&D) department.
-> Adaptation of competitors’ ideas (it is important no to infringe
copyright/patent laws)
-> Market research and focus groups - used to stimulate discussion about new
products.
-> Employees (this has an additional bonus of motivating staff)
-> Sales people (they have a closer contact with the final consumer.)
-> Brainstorming in groups 

2 Ideas screening 
The purpose of this stage is to eliminate those ideas that stand the least
chance of being commercially successful. Care should be taken to do this
since it is very expensive to develop and market new products. 

3 Concept development and testing 

The following points are discussed - 
-> who are the most likely consumers of this product?
-> What product features should be incorporated?
-> What specific benefits will this product provide?
-> How will consumers react to it? (can be tested with focus groups)
-> What are the most cost-effective methods of manufacturing?
-> What will it cost to produce?

4 Business analysis 
This stage considers the likely impact of the new product on the company’s
costs, sales and profit. The cost will be set and the expected sales volume
and market share can be estimated (along with break even level).

5 Product testing 
This is concerned with the technical performance of the product. It should
include:
-> Developing a prototype 
-> Testing the product in typical use conditions
-> Using focus groups to gather opinions about the product
-> Adapting the product as required

6 Test marketing 
Benefits of test market - 
-> Actual consumer behaviour can be observed and measured 
-> Feedback from consumers will enable a final decision to be made about
investing capital 
-> Risk associated with a product failing after launch can be reduced. 
-> Any weaknesses of the product can be identified.

Test marketing - the launch of the product on a small scale market to test
consumers’ reaction to it.

Limitations of test market -

-> It can be expensive 
-> Competitions are able to observe a firms’ intentions and react.

7 Commercialisation - 
This refers to full scale launch of the product and corresponds to the
introduction phase of the product life cycle. This will be the most crucial time
of the life of the product.

Research and Development 

Research and development - the scientific research and technical
development of new products and processes. 

The significance of R&D and possible business strategies  

New product innovations allow businesses to survive in growing rapidly
changing market places. They may have a considerable unique selling point
over rivals So that business can charge premium prices - earning higher profit
margins.
Expenditure in R&D can be a risky investment (no guaranteed returns).
-> This is why some businesses licence other businesses new ideas or adapt
existing products which might be a safe strategy but can lead to legal battles if
the copy is way too close to the original concept.
-> Also it will fail to the capture consumer's imagination and it is often referred
to as Follow the Leader strategy. 

Offensive R&D strategy - this is to lead the industry with innovative products.
The name of these businesses to gain market share in market dominance.
Defensive R&D strategy - This will be to attempt to learn from the initial
innovators mistakes and weaknesses. it will aim to improve on the original
products or by developing slightly different types of goods, which might appeal
to other market segments. 
 
Government encouragement for research and development 
Governments can provide a favourable environment for R&D in two many
ways -
-> Providing some legal security to inventors and designers by allowing them
to patent or register a design. 
-> They can provide financial assistance to businesses engaging in R&D.

Factors that influence the level of R&D expenditure by a

business  
-> The nature of the industry - rapidly changing or not
-> The R&D spending plans of competitors - it is important to spend as much
as or more than competitors of market share and Technical leadership are to
be maintained
-> Business expectations - if managers are optimistic about future profit
margins then they are more likely to agree to invest in R&D.
-> The risk profile or culture of the business - the attitudes of the management
to risk and whether shareholders are prepared to invest for the long term.
-> Government policy towards grants to businesses and Universities for R&D.

Research and Development - an evaluation

Not all R&D leads to successful breakthroughs - New ideas often fail to reach
the market because of defects in design and manufacture, competitor's
product leaping ahead in terms of Technology and higher than expected
costs. 
-> They may fail even when they are launched. 

Here are some of the reasons why fully researched and developed product
merits the wider market and fail -
-> Inadequate market research
-> Poor marketing support or inappropriate pricing marketing 
-> changes in technology leave the product dated
-> competitors release a product that the consumers prefer. 

Sales forecasting - potential benefits

Sales forecasting - Predicting future sales levels and sales trends 

Benefits of precise forecasting -

-> The production department would know how many units to produce
-> The marketing department would be aware of how many products to
distribute
-> human resource is workforce plan would be more accurate
-> finance could plan cash flows with much greater accuracy

In reality such Precision and forecasting is impossible because of all the

external factors that can greatly influence sales performance, despite these
problems most firms make sales forecasts in order to reduce to an acceptable
minimum to the unforeseen nature of future changes. 
Market forecasts form an essential part of the market-planning process and of
the screening process before new products are launched onto the market. 

Sales-force composite 
Sales force representatives have the task of keeping in contact with
customers using which they are able to develop a real insight into market
Trends and potential demand for the future. 

Sales-force composite - A method of sales forecasting that adds together all of

the individual predictions of future sales of all of the sales representatives
working for business. 

This method has the advantage of being quick and cheap to administer.
However, sales representatives may not be aware of microeconomic
development and competitors' actions which have a substantial impact on
future sales.
-> Customers may overestimate the number of products that they hope to sell
in the future in the hope of gaining a more favourable arrangement with the
supplying business. 

Delphi method 
Delphi method - A long range qualitative forecasting technique that obtains
forecasts from a panel of experts.

The experts do not meet and they are anonymous to each other. The
facilitator collection coordinates the opinion from experts who are sent detailed
questions asking for their judgement about possible future events. These
questionnaires are summarised and sent to all of the experts on the panel to
see if the experts have changed their Minds after reading the conclusions from
the first round.
Eventually a consensus is reached that represents the most likely correct
forecast. Tests have proven that the Delphi Technique is more accurate than
unstructured group experts giving their opinion and focus. 

Consumer surveys
These are a form of market research in which the questions may either be
quantitative in nature or qualitative.For Greater accuracy the sample of
consumer selected must be large enough to be representative. Such surveys
must be conducted by the business itself.
This can be expensive but it is likely to lead to more accurate demand
forecasts. 

Jury of experts 
The Jury of experts uses senior managers within the business who meet and
develop forecasts based on their knowledge on specific areas of
responsibility.
This is quicker and cheaper than the Delphi Technique but lacks the external
view of market conditions and consumer trends. 

Jury of experts - Uses the Specialists within a business to make forecasts of

the future. 

Quantitative sales forecasting methods

Correlation - establishing causal relationships 
This method attempts to explain the most important factors causing changes
in sales data. Future planned changes in advertising expenditure could be
used to make predictions about likely changes in sales. 

Line of best fit – drawing a line (in a graph) that fits the correlation. This can
be used to make forecasts.

Limitations of such a technique -

-> establishing correlation does not prove that there is a cause and effect
-> it fails to consider other factors
-> mathematical methods of correlation analysis can be undertaken that do
not rely on a graphical approach.

Time-series analysis 
This method of sales forecasting is based entirely on past sales data.

Extrapolation 
Extrapolation means basing the future predictions on past results. This
method extends the line when plotted on a graph.
-> It assumes that sales patterns are stable and will remain so in the future. 

Moving averages 
The factors that influence future sales:
The trend - the underlying movement in a time series. 
Seasonal fluctuations - the regular and repeated variations that occur in sales
data within a period of 12 months.
Cyclical fluctuations - these variations in sales occur over periods of time of
much more than a year and are due to the business cycle.
Random fluctuations - these can occur at any time and will cause unusual and
unpredictable sales figures

Once these have been identified, future sales forecasts can be made.
-> The moving average method involved calculating moving totals from a
number of sales figures.
-> Four quarters or four-quarter moving total is added with the next four
quarters (1+2+3+4 + 2+3+4+5) and the eight point moving total is divided by 8
and the number is put in the center of the 5 quarters added (3). 
The moving average is known as the trend of the data. The underlying
movement of the data has been identified by averaging out the regular
seasonal fluctuations. 

Seasonal variation = actual reason - moving average (trend)

Forecasting using the moving-average method 

-> Plot the trend on a time-series graph 
-> Extrapolate this into the future

Moving-average sales forecasting method - an evaluation 

Advantages - 
-> It is useful for identifying and applying seasonal variation to predictions.
-> It can be reasonably accurate for short term forecasts in reasonably stable
economic conditions.
->It identifies the average seasonal variations for each time period and this
can assist in planning for each quarter in future.

Disadvantages -
-> It is a fairly complex calculation.
-> forecasts further into the future become less accurate. External
environment factors can change.
-> Forecasting for the longer term may require the use of more qualitative
methods that are less dependent on past results. 

Extrapolated sales - variation = actual sales 

Average seasonal variation = seasonal variation of quarters (1st, 3rd, etc)
      ____________________________________
      No. of quarters considered