Marketing Strategy, Planning And Control

In the opening chapter of this textbook emphasis was placed on the need for enterprises to adopt the marketing concept and a marketing orientation. Where this is done there is also a need to develop marketing orientated strategy. It is not enough to install marketing management within an organisation with middle managers overseeing functions such as product/brand management, advertising, distribution and marketing research. Marketing should not be implemented only at the functional level. Rather, the business as a whole has to be directed by a strategy whose focus is the marketplace. In formulating such strategies, there has to be a careful matching of market opportunities with organisational resources; this is the task of strategic marketing planning. Thus the subject matter of this chapter is strategy and planning coupled with the controls that need to be in place if strategies and plans are to be prevented from going astray.

Chapter Objectives

The objectives of this chapter are to enable the reader to:

Clearly differentiate between corporate planning, business policy and marketing planing

Describe the process of strategic marketing planning

Become familiar with the content of a marketing plan

Understand the different types of marketing control

Appreciate that the control process is essential for evaluating the marketing plan and for the optimisation of resources

Make use of some of the principal techniques used in identifying weaknesses in the performance of the marketing plan.

Structure Of The Chapter

Following a brief clarification of the key terms in marketing planning and control, the process of strategic marketing planning is explored. The reader is then given an overview of the content of a marketing plan. The discussion subsequently moves on to the topics of monitoring and control. A detailed explanation is given of selected analytical techniques, including sales and profitability analysis. A brief consideration of the principal areas of marketing which can yield improvements in efficiency concludes the chapter.

Strategy, policy and planning

Given that this is an introductory text, and as such is likely to be read by people with little or no previous knowledge of the subject matter, it would seem appropriate to begin this chapter with an explanation of terms whose meaning may not be immediately clear or are easily confused with one another. Those who are new to the subject are unlikely to have a clear understanding of terms like corporate strategy, business policy or market planning and the differences between them, where these exist.

Corporate strategy

An organisation’s corporate strategy is reflected in the statement of its overall objectives and the means by which these are to be met. Corporate strategy is usually stated in such a way as to convey the reason for its existence, i.e. its mission and the business it is in or wishes to be in. Whilst corporate strategy and marketing strategy are not one and the same. Baker 1 argues that:

the firm’s selection of a marketing strategy will influence and affect everything which it does — to this extent then marketing strategy and corporate strategy are inextricably interlinked.

Whilst this textbook continually stresses the central importance of marketing and indeed promotes the idea that every aspect of an enterprise ought to be market driven, effective marketing is a necessary but not sufficient condition for business success. In market driven organisations marketing will be allowed to influence other functional areas like R & D, production, finance and personnel these will each have individual, if concerted, strategies and collectively fall into the realm of corporate strategy.

Business policy

Policies are bodies of rules established to guide managers in their decision making. In essence, a policy prescribes the boundaries of the alternative courses of action which the organisation leaves open to him/her within a defined set of circumstances. Thus, for example, a manager whose soft fruit is losing sales in export markets because competitors are offering extended credit to importers may be constrained in his/her actions by company policy with respect to credit. That policy may be paraphrased as, We will never be placed at a disadvantage by offering terms and conditions of sale that customers perceive to be inferior to those offered by competitors. In other words, the manager will know that he/she has to at least match or if possible better the terms and conditions offered by competitors. How the manager does this is a matter for him/her to decide. (The manager will not necessarily follow suit and offer similar terms to those of competitors but may look instead for ways of increasing the value of doing business with his/her organisation in other ways such as greater flexibility in minimum consignment sizes, faster delivery or improved protective packaging but the option of competing on the basis of credit terms is open to). Alternatively company policy might be embodied in a statement like, Never to buy custom through direct financial incentives. Here the company may be taking the view that sacrificing part of the marketing margin to gain market share does not help it reach its stated goals and is incompatible with its corporate strategy. In this case, the manager knows immediately that company policy prohibits the use of financial incentives and he/she must seek to regain lost sales in some other way.

Marketing planning

Basically planning involves setting objectives, designing and implementing a programme to achieve the organisation’s objectives and having a monitoring and control mechanism to ascertain whether the planned programme is on track or has achieved its desired objectives. Greenley 2 differentiates between corporate planning, strategic planning and operational planning. He says that corporate planning is the organisation’s overall planning system and its two principal constituent parts are strategic and operational planning. Strategic planning begins with an assessment of an organisation’s internal and external environments.

Figure 3.1 The characteristics of marketing and operational planning

Operational planning can be further divided into short and long term planning. Short term operational planning is also known as tactical planning. Tactics and strategy differ in several important respects. Tactics relate to the following of a plan to achieve short term objectives. Thus tactics equate to the marketing plan rather than marketing strategy. Strategic marketing would establish policies for each element of the marketing mix and would specify how resources are to be deployed. Tactics deal with marketing problems in the short term. Consider the position of a fish supplier who has the competitive advantage of owning refrigerated trucks. The supplier might adopt a marketing strategy in which the price is set high in order to: recover his/her investment in expensive technology; establish a price-quality relationship in the mind of the consumer; and ensure that the level of demand does not greatly exceed the amount he/she is able to supply. Since this is his/her strategy, there would be no departure from the maintenance of prices which are high relative to those of other suppliers. However, there may be tactical manoeuvering in order to overcome certain marketing problems. When the supplier, or the product, is new to the market there may be need to stimulate demand by offering discounts. This would probably be done through the use of special money-off coupons, or vouchers, so that the discounts could be targeted at certain customer groups and also to underline the fact that discount prices will not be the normal practice with respect to the product and are for a limited time only. Similarly, when there is a glut of fish on the market or when the supplier wants to improve short term cash flow or release space in his/her storage facility to accommodate new product lines, the tactic of offering 20% extra free in a bag of white-bait or kapenta fish might be employed. Once again the supplier would be careful to communicate to the market that these extra value packs would be available in the short term only. Thus, whereas marketing strategy focuses upon achieving long term organisational goals, tactics focus upon achieving annual marketing objectives.

Before moving on, it should be said that corporate strategy, business policy and marketing planning have relevance to enterprises of all sizes. In smaller organisations these management activities are likely to be carried out in a less formal and less sophisticated way than in larger corporations but they need to be done, formally or informally, explicitly or implicitly. Even the small independent grain trader will have to give thought to such matters as his/her strategy for survival in a municipal market overcrowded with grain traders, will have to be consistent whilst remaining flexible — in his/her reactions to problems and opportunities and needs to be in a position to anticipate changes in the marketing environment so that he/she can identify and exploit emerging opportunities.

Strategic business units

When businesses are small and owner operated there tends to be a high degree of entrepreneurial drive. Even after the organisation begins to grow, and salaried managers are employed, there may be no appreciable fall in the level of flair, energy and commitment to achieving success, if indeed there is any at all. However, in very large organisations managers can feel divorced from the events and decisions that are shaping the business. This is particularly the case where the enterprise is highly diversified. For example, a large enterprise could have interests in say grain trading, fertilizer procurement, the design and installation of silos, financial advisory services to farmers, the hire of transportation of bulk commodities, etc. A manager in fertilizer procurement could well feel that he/she has relatively little effect on overall performance since decisions such as budget allocations and sales and profit targets are dictated and determined by what happens in grain related activities. This is likely to suppress that manager’s search for new and better ways of doing business because he/she believes to do so would have relatively little effect and would not be recognised, or rewarded, by senior management. The concept of a strategic business unit (SBU) was developed as a means of retaining the vitality of the entrepreneurial spirit by giving management a high degree of responsibility and autonomy in decision making. The SBU becomes a separate business entity, although still belonging to a larger commercial enterprise, having its own defined business strategy and a management with direct responsibility for its profits and sales performance.

SBUs can be based around individual brands but it is more common for a large corporation to break down its business according to either product categories (e.g. fertilizers, grain trading and farm buildings) or markets served (e.g. agriculture, distribution and construction and design). Aaker 3 advises that:

When strategies and competitors have a high degree of commonalty across businesses, it makes sense to combine those businesses into a single SBU. When they differ in meaningful ways, however, it will probably be more useful to use separate SBUs.

The size of a business is also a consideration when deciding on how to structure the organisation. Even when an organisation’s businesses have similar strategies and needs managers can feel impotent if it is a very large enterprise and it may be best to create two or more SBUs to maximise motivation and the application of initiative, and therefore corporate performance. To do so can change the way a manager thinks about his/her own mission. For instance, the manager of the transport department within a large grain trading organisation is likely to focus his/her attention upon controlling distribution costs and maximising the efficiency with which the transport function is operated. As the manager of an independent SBU the manager may begin to see his/her task more in terms of maximising the return on investment in transportation. This requires him/her to redefine the business his/her division is in (as opposed to thinking in terms of what business the grain trading division is in). New opportunities may become apparent such as the hiring out of underutilised vehicles, storage capacity and equipment; offering advisory services in logistics, stock control management, fumigation procedures etc.; and so on. The manager thus becomes less myopic in his/her view of the mission of the business.

The degree of autonomy and independence of an SBU varies enormously. Much depends upon whether the SBU has its own dedicated operations such as R & D, design, production, distribution and accounting. Often, the economics of business operations dictate that SBUs share some of these facilities but this will almost undoubtedly reduce the individual manager’s sense of responsibility and control.

The need for marketing planning

Strategic planning began as a response to the inadequacy of assuming that the future will look very much like the past. It is dangerous for a business to extrapolate in economies and markets that are developing and changing. In his classic article Marketing Myopia, Levitt 4 gives several memorable examples of successful businesses that subsequently went into decline because their actions were based upon the implicit assumption that the status quo would be maintained. By way of example, Levitt cites the case of the dry cleaning industry which failed to see that in the future the main threat to their business would come not from continually improved chemical cleaners but from the development of stain resistant synthetic materials. In a similar vein the American railroad companies perceived one another to be competitors but did not anticipate how transporters over road, sea and air would develop their passenger and freight handling facilities to a degree that railroads became uncompetitive. Aaker 4 explains that strategic planning encourages enterprises to abandon the notion that past extrapolations can be relied upon as a basis for future actions. Rather, they should assume that there will be discontinuities between the past and the future.

Strategic planning is also known as strategic market planning when its focus is upon the market environment within which the enterprise must operate. This reflects the fact that what an enterprise plans to do now, in order to prepare for future developments in the market, should be based upon a detailed understanding of that market and not on mechanistic projections of past and present patterns. Strategic market planning enables organisations to anticipate events rather than merely react to them. Aaker 3 itemises the following benefits of strategic market planning:

It focuses management’s attention on external events, especially those representing threats and/or opportunities. All too often companies tend to be inward looking when, in reality, customers and competitors are external to the firm and profits are made outside not inside the organisation.

It locks management into taking a long term perspective when the pressures are to adopt a short term focus with grave dangers of making strategic errors. The natural tendency is for managers to devote their time to dealing with the problems and opportunities of today, to the exclusion of consideration of the longer term. Strategic market management usually has a well defined time-cycle when managers have to submit short, medium and long term plans. Such cycles instill a discipline that forces managers to devote a minimum amount of time giving thought to future developments.

It changes the basis on which resource allocation decisions are made. Resource allocations are frequently dictated by financial professionals who understand accounting conventions and terminology and this is often employed to the disadvantage of managers less well informed on these matters. In other cases, resource allocations are made according to the political strength of a group, department or individual manager rather than on commercial merit. Strategic planning seeks to match resources to opportunities (and/or threats).

It provides a strategic management control system. Monitoring and control are an integral part of strategic management. This enables management to deal with problems as these emerge rather than allowing problems to become crises. These aspects of strategic management are discussed later in this chapter.

It provides a vertical and horizontal communication and coordination system. Strategic market management is a vehicle for communicating problems and proposed strategies with precision due to its vocabulary and explicit expression of expectations of the future.

It helps enterprises operating in rapidly changing and unpredictable environments to cope.

Thus, strategic market management is proactive in that it prepares managers not merely to expect change but to anticipate it. Moreover it serves as an instrument for making management more externally orientated and less insular. Strategic market management also focuses management attention on the longer term and counters the natural tendency for management time to be totally absorbed by today’s problems and opportunities.

The process of marketing planning

As was said earlier, planning involves setting objectives, designing and implementing a programme to achieve the objectives and developing a system for monitoring and controlling the execution of the plan. This process involves analysis, planning, implementation and control. The process of marketing planning is illustrated in figure 3.2.

Figure 3.2 The marketing planning process

The activities described in figure 3.2 can be categorised as diagnosis, planning and action. These three activities, once started within an organisation, never stop. SWOT analysis constitutes the diagnosis stage, the objectives and strategies stages are the planning activities and the action plan and monitoring, evaluation and control stages are the action part of the plan.

Plans can be categorised according to time span and complexity. Strategic marketing plans which are intended to guide management through the environment in the long term are generally complex and have a 23 year time horizon. Annual marketing plans (i.e. operational marketing plans) which focus upon specific target marketing objectives of the marketing mix — product, price, promotion, place and people have a one year time horizon. Tactical plans (i.e. short term operational marketing plans) which are reaction plans to, say, changes in a competitor’s price, have a one to three month duration and are intended to bring the organisation in tune or to react to a potential disadvantage.

Depending on the agricultural organisation type, plans may vary in terms of their sophistication. A small scale farmer may leave planning to others, for example, to an extension officer who is advising him/her with respect to what and when to plant, or he may react to pre-planning price announcements. His planning may be non-existent or very rudimentary. More sophisticated large scale farmers may have elaborate budgeting procedures, crop rotation patterns and crop production plans. Food processing organisations which deal with many suppliers, products and customers may have a whole range of tactical, annual and strategic plans. Government, which plans the economy, may enlist all types of planning devices.

A whole variety of plan types can be identified including:

Corporate plans

An overall master plan for the organisation and its divisions setting out what business(es) it intends to be in over a given time horizon.