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The Ultimate Guide to STRATEGIC MARKETING
Real World Methods for Developing Successful, Long-term Marketing Plans
By Robert Hamper
McGraw-Hill EducationCopyright © 2014 Robert J. Hamper
All rights reserved.
The pace of social and economic change is accelerating in every sector, and with it, the risk of doing business is increasing. Competition is becoming stiffer as global marketing, e-commerce, and emerging markets are growing at a dizzying pace. In a world of look-alike products and services, your firm must find a way to stand out, and if it does not, it will not be competitive in the marketplace. You must hit the right target market with exactly the right product. You need only look at the cell phone market, where certain once-dominant players did not keep up with the latest technology and/or did not offer the right product. As a result, many of them lost substantial market share or are no longer in business. Brand loyalty will last for only a short while if products in the marketplace are ill conceived and poorly designed.
To succeed, your firm needs accurate marketing information to identify your target markets, determine their needs, and offer the best products and services to meet those needs. These efforts must be coordinated by developing a sound strategic marketing plan that can help your company achieve its twin goals of increased profitability and a healthy market share. Many company managers find themselves confused when it comes to developing a marketing plan. Part of the problem is that some managers do not fully understand the function of marketing and the process of active, future-oriented marketing planning.
As a result, they are merely reactive, trying to keep up with changing conditions or cutting costs to meet earnings objectives. Instead, they must become proactive, anticipating those changing conditions and developing a plan of action for the future, which is a dynamic as opposed to a stagnant plan. In return, this should increase revenues and profits, create new markets, develop new ventures, and expand existing markets.
Provided in this chapter is an overview of proven marketing techniques and a description of the marketing plan development process that is being followed by many successful companies.
Marketing planning is the development of a logically structured format for those activities that lead to the setting of marketing objectives and the plans for achieving them.
There are many external and internal conditions that will influence the development of your strategic marketing plan. Some of these issues include environmental changes, increased competition, company orientation toward risk, and management participation. These are briefly described here.
Environmentally related problems involving your firm may show up as sales declines, increased competition, and slower revenue growth. If your competitors are not experiencing any of these problems, you may want to check your promotional results, product quality, price competitiveness, and risk assessment by management. In fact, a good control and monitoring system should define the variances from the marketing plan early on so that appropriate action can be taken and you can reach your marketing goals.
Slower market share growth of products usually results from a mature product line, an economic slowdown, increased competition, no new ventures, or the fact that no new product regeneration is taking place.
Increased competition is an external environmental problem that your strategic marketing plan needs to address quickly. Since the potential impact on your firm could be great, it is smart to ask yourself the following questions:
* Why are more competitors entering your market and successfully increasing their market share while your company's performance is declining, as shown by slower growth or even a decrease in market share?
* Have you kept your business plan and marketing plan up to date? Are the plans dynamic or stagnant? Are they updated continuously, or is updating them just a once-a-year academic exercise?
* Are your competitors start-ups, buyouts, acquisitions, or a new division of a firm? These types of activities by competitors usually indicate that they see your market as being attractive and believe that they can surpass your firm in market share growth.
Has management's need to stay competitive changed? Has the level of risk that management is willing to assume changed? Is management able to take on the risk associated with expanded target market selection, product modification, promotion, creativity, new distribution channels, and increased pricing flexibility?
Does the new strategic marketing plan have the support of upper management and the necessary talent to actually implement the plan?
This is where marketing research can aid in defining problem areas. Information on the following issues will enable you to ferret out the main causes of these problems: evaluating the long-term sales potential of target market segments; monitoring competitors' activities; identifying new or regenerated products; tracking changing customer needs; evaluating the current needs and wants of your target market, product segmentation, your products' stage in the product life cycle, and growth in maturing market segments; and checking your distribution channels for efficiency. Compare the results to your current strategic marketing plan to evaluate whether it is becoming out of date.
Finding information on these issues will start you on the correct path to closing any gaps that exist in your current marketing plan.
Marketing can be defined broadly as a function within a company that seeks to generate a profit by organizing the firm's resources and activities to determine and satisfy the needs, wants, and desires of its target markets.
In the past, marketing was regarded as being synonymous with selling and advertising. Today, marketing is considered a management function. Marketing executives and other company managers decide how the company's resources should be utilized to achieve customer satisfaction and specific profit goals. Advertising and promotion usually support marketing efforts.
Notice that the emphasis is on profits rather than merely on sales. Companies are not seeking an increase in buying per se; they are more interested in the return on each item sold. As a result, they must focus their efforts on finding the target markets that are most likely to buy their products. Marketing must determine the following:
Who the company's customers are and what they need and want
When they want it
Where they want it
How they want to buy it and what price they're willing to pay
These points make up the four Ps of marketing, referred to as the marketing mix: product, promotion, place (distribution), and price. The four Ps are what the marketing manager considers controllable variables; that is, they can be adjusted and changed in determining strategies for the firm and for the products and services that the firm wishes to market. At this juncture you may ask, "Where are the seven Ps and the alphas and the like?" These other variables will be discussed in later chapters. However, obtaining a firm grasp of the initial four Ps, within which several scholars believe the other Ps are embedded, is critical in the development of a strategic marketing plan.
The Marketing Concept
The marketing concept reflects the current shift from production-oriented policies to a consumer- or marketing-oriented approach. Briefly defined, the marketing concept is a management philosophy that states that the key task of a company is to discover what various target markets want and need, and to deliver the desired products and services to those markets more effectively and efficiently than the competition does. This concept has been around for decades and is still taught in every introductory marketing class. Why, then, do many companies not use this as part of their planning process? That question will be answered in future chapters.
In the past, firms organized their resources to make and design products virtually in a vacuum. Advertising and promotion were then responsible for "pushing" products or services through the market by creating consumer demand for them. We were sold novelties, electrical gadgets, and hundreds of other items that we suddenly couldn't do without. Through the boom years of the 1950s and 1960s, companies used the push strategy to capture market share.
In the 1970s and 1980s, however, the economy experienced a series of setbacks. Two severe recessions, an energy crisis, and foreign competition brought an end to the fantasy of an ever-expanding marketplace. In the 1990s, middle managers were asked to develop a strategic marketing plan to provide a long-term strategic direction that focused on the specific needs of the market. In the late 1990s and early twenty-first century, global marketing and e-commerce have become major foci for many firms that are seeking to grow their markets. This cannot be overemphasized. Today, more and more industries are dominated by fewer and fewer large companies, while the remaining firms scramble to find and fill market segments and niches. Competition for the consumer dollar has made it vital to research what each particular customer group wants and then meet that group's needs.
As a result, corporate marketing strategies have changed from pushing products through the market to pulling them through. In a pull strategy, companies pinpoint consumer demand for a product, then manufacture the product and let consumers' demand pull it through the market. Promotion and advertising are aimed at consumers who have already been identified by market research, and they aid in creating this demand. The goals are to increase consumer awareness of the product and persuade buyers that it will fulfill their needs and wants. While it is certainly not foolproof, the pull strategy has proved successful for many companies.
The principle is clear. A firm using the marketing concept has the potential to grow at a much faster rate than a production-oriented firm, since its basic inputs for planning and product development are from the target market.
The marketing concept requires a company to adopt an integrated approach to planning and execution that includes the entire company hierarchy, from senior executives to field salespeople. Furthermore, this concept involves all the personnel and material resources of the company, with the dual end result of satisfying consumer needs and achieving the company's profit goals. With this approach in place, firms establish a central company vision and mission that serve as a focal point for management, produce the right products for each market, and achieve company sales and profit goals. The key to this process is good planning, as opposed to good luck or merely a "gut" feeling.
The development of a strategic marketing plan for international firms is somewhat different from what it is for domestic firms. Since there are more environmental variables in international firms, the process becomes more complex. More time and effort are required to identify and evaluate the external trends and events for multinational corporations than for domestic corporations. The degree of complexity is primarily driven by how many international markets you serve.
This is due in part to shareholders' or investors' expectations of sustained growth in revenue, which may be obtained only through international expansion. But if the strategic marketing plan is poorly developed, international expansion by itself is no guarantee of success.
In fact, there are both advantages and disadvantages to participating in international operations as opposed to just operating a domestic company.
Firms have numerous reasons for formulating and implementing strategies that initiate, continue, or expand international growth. One advantage of expanding internationally is that a firm can gain new customers for its products and services, which should increase the company's revenues. Growth in revenues and profits is a common organizational objective and is often an expectation of shareholders because it is a measure of an organization's success.
In addition to seeking growth, firms with international operations may have some of the following advantages:
1. International operations can spread economic risk over many different markets.
2. International operations may enable the firm to lower its production costs by using less expensive materials and less expensive labor. In addition, certain tax advantages may be obtained.
3. Competition may be limited or nonexistent.
4. International operations may enable firms to discover the new cultures and business practices of their foreign operations. Management can get better acquainted with new customers, distributors, and suppliers.
5. Most foreign governments offer incentives to encourage foreign investment.
6. Economies of scale can be achieved from operations that are global rather than limited to domestic markets. Also, larger-scale production and better efficiencies will decrease unit cost and increase pricing flexibility.
On the other hand, there are potential disadvantages of international operations:
1. International operations require an understanding of different social, cultural, demographic, environmental, governmental, legal, and economic laws and regulations. Also, the language and value systems may differ from country to country.
2. Foreign competition is often underestimated. Your marketing research must be complete and in-depth.
3. Dealing with the country's accounting methods and operating in another currency may be beyond your firm's capabilities.
4. Obtaining external basis data may be very difficult, and the reliability of these data may be questionable.
E-commerce allows firms to sell products, advertise, purchase supplies, track inventory, eliminate paperwork, and perform other necessary business tasks. This function provides better customer service, increased efficiency, better products, and higher profitability. It also includes the Internet. Most individuals understand the importance of the Internet in e-commerce. It allows the target market to engage in comparative analysis of many factors of a product other than price during the buying process. The Internet needs to be included in your marketing strategy development process because of its powerful marketing potential. Entire books have been written on this topic, and an in-depth analysis of it is outside the scope of this book.
The Company Planning Process
The company planning process creates a hierarchy of plans beginning with the overall strategic business plan, moving to the strategic marketing plan, and finishing with individual product plans. Figure 1.1 summarizes the interactive nature of this process and the scope of the three plans.
Overall Strategic Business Plan
Most successful companies develop an overall strategic business plan that receives input from all functional areas. These functional areas are driven in part to meet the plan's objectives. First, senior management formulates objectives for the organization. Then, managers in various functional areas, such as marketing, contribute to the process by developing specific functional strategies and ultimately tactics to achieve the corporate objectives. Effectively, the process involves a hierarchy of plans, whereby the strategy at one level becomes the objectives at the next, and so forth.
At this point, it is necessary to position marketing planning within the context of strategic planning. Strategic decisions are concerned with:
1. Defining the scope of the organization.
2. Determining the long-term direction of the organization.
3. Optimizing the activities of the organization relative to the environment in which it operates.
4. Aligning the organization's scarce resources of land, labor, and capital with its resource base. The strategic business and marketing planning process can be studied and applied using a model. Every model represents some kind of process. A widely accepted model of the overall strategic business and marketing plan is shown in Figure 1.2. This model represents a lucid and practical approach for formulating, implementing, and evaluating business and marketing strategies.
Excerpted from The Ultimate Guide to STRATEGIC MARKETING by Robert Hamper. Copyright © 2014 Robert J. Hamper. Excerpted by permission of McGraw-Hill Education.
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