In this section, we take all that has been discussed in the Principles of Marketing Tutorials, and see how marketers use this information to manage business decisions. In particular, in this tutorial we focus attention on the importance of marketing planning with special attention given to the role marketing strategy plays in the planning process. For marketers, planning is an essential task that must be continually undertaken. As we will see, shifting market conditions, including changing customer needs and competitive threats, almost always ensure that what worked in the past will not work in the future, thus requiring revisions in how a product is marketed.
Marketing planning is also necessary since it is often a prerequisite for obtaining funding. Whether one is a marketer in a large corporation seeking additional money for her or his department, or is part of a small startup company looking for initial funding, requests for money almost always necessitates the presentation of a supporting plan.
In this tutorial, we discuss different types of marketing strategy that can be followed to meet marketing objectives.
Importance of Planning
As we have seen throughout the Principles of Marketing Tutorials, marketers consider many factors when making decisions. Of course, the main factors are those directly associated with how customers (including distribution partners) respond to an organization’s marketing efforts, such as how they may react to changes in a product, new advertisements, special pricing promotions, etc.
But when making decisions, marketers face other concerns that are not directly customer related. For instance, as we discussed in the Promotion Decisions Tutorial, marketing decisions (e.g., major advertising campaign) may place pressure on other areas of the organization (e.g., production, shipping) to prepare for potential increase in demand. Other examples of how marketing decisions may have an impact include:
- As we noted in our definition of marketing in the What is Marketing? Tutorial, decisions must be made with an understanding of the value these provide not only to customers but to the marketing organization. Consequently, marketers must be aware of how their decisions fit with the overall objectives of the organization. For example, a company whose goal is to be the low-price leader may have concerns if the company’s marketing department wants to market a high-end product, since this would go against the reputation and core strengths of the company.
- Marketing decisions also directly affect an organization’s financial condition. Marketers’ efforts generate the funds (i.e., sales) needed for the organization to survive, but do so while using the organization’s resources (e.g., funds). Controls must be put in place to ensure the results of what the organization spends through marketing meet expectations (i.e., meets return on investment goals).
- In the Managing External Forces Tutorial, we showed that marketers’ decisions may affect peripheral stakeholders who are not directly connected to the marketing organization but have the potential to impact the organization if issues arise that draw their attention.
Because marketing decisions have both internal and external impact, marketers are wise to make their decisions only after engaging in a careful, disciplined planning. Marketers who make hasty, off-the-cuff decisions without regard to the implications are taking risks that may lead to problems. Instead, marketing decisions should be made with consideration of how these affect others and the organization’s resources required to carry out the plan.
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The Marketing Plan
The central point in planning for marketing decisions is the Marketing Plan. As we note in the highly detailed How to Write a Marketing Plan Tutorial, the plan serves several functions including:
- Forcing marketing personnel to look internally in order to fully understand the results of past marketing decisions.
- Forcing marketing personnel to look externally in order to fully understand the market in which they operate.
- Setting future goals and providing direction for future marketing efforts that everyone within the organization should understand and support.
- Serving as a key component in obtaining funding to pursue new initiatives.
For companies operating separate units in different international markets, a different Marketing Plan is often needed for each market even though the same product is sold in each location. This is often necessary since the conditions for one market may be significantly different than another market and, because of this, require a different marketing approach.
Whether the marketer is creating a short plan intended to cover just a few months or a full-blown document that guides it for a year or more, nearly all plans require the undertaking of significant marketing research to gain stronger insight on the market. With knowledge of the market, the marketer can then begin to build the plan, which will include the key components discussed in the next section.
Components of the Marketing Plan
The Marketing Plan is often a complex and diverse document that examines many areas. For most plans the key components found in the document include:
Purpose and Mission Statement – This provides an explanation as to why the Marketing Plan is being prepared. In most cases, this section of the plan will also include a short discussion of the organization mission, which represents the long-run vision for what the organization hopes to be. The mission comes from the top leaders of the organization and often remains unchanged for many years.
Marketing Objectives – Reflects what the organization expects to achieve with its marketing efforts. As with the mission, objectives also flow from the top of the organization down to the marketing department. Objectives can be in the form of financial goals (i.e., profits) or marketing goals (e.g., achieve certain level of market share).
Marketing Strategy – Achieving objectives requires the marketer engage in marketing decision-making, which indicates where resources (e.g., marketing funds) will be directed. However, before spending begins on individual marketing decisions (e.g., where to advertise), the marketer needs to establish a general plan of action that summarizes what will be done to reach the stated objectives.
Tactical Marketing Programs – Marketing strategy sets the stage for specific actions that take place. Marketing tactics are the day-to-day activities that marketers undertake and involve the major marketing decision areas. As would be expected, this is the key area of the Marketing Plan since it explains exactly what will be done to reach the organization’s objectives.
Forecasts and Budget – The marketing budget lays out the spending requirements needed to carry out marketing tactics. While the marketing department may request a certain level of funding they feel is required, in the end it is upper-management that will have final say on how much financial support will be offered. In most cases, such requests must be justified with the marketer developing forecasts that may include estimates of sales volume, number of customer visits, level of product awareness, coupon usage rates, and many others.
Implementation and Analysis – This section identifies how and by whom the tactical programs are carried out. In many cases, a timeline is presented showing when tasks will occur and who will be responsible. Additionally, it shows how and when success will be measured.
For more detailed discussion of each of these components see the How to Write a Marketing Plan Tutorial.
Types of Marketing Strategy
One of the most important concepts of the marketing planning process is the need to develop a cohesive marketing strategy that guides tactical programs for the marketing decision areas. In marketing there are two levels to strategy formulation:
- General Marketing Strategies
- Decision Area Strategies
General Marketing Strategies
General Marketing Strategies set the direction for all marketing efforts by describing, in general terms, how marketing will achieve its objectives. There are many different General Marketing Strategies, though most can be viewed as falling into one of the following categories:
1. Market Expansion
With this strategy marketers look to grow overall sales in one of two ways:
Grow Sales with Existing Products – With this approach, the marketer seeks to actively increase the overall sales of products the company currently markets. This can be accomplished by: 1) getting existing customers to buy more, 2) getting potential customers to buy (i.e., those who have yet to buy), or 3) selling current products in new markets.
Grow Sales with New Products – With this approach, the marketer seeks to achieve objectives through the introduction of new products. This can be accomplished by: 1) introducing updated versions or refinements to existing products, 2) introducing products that are extensions of current products, or 3) introducing new products not previously marketed.
2. Market Share Growth
This strategy looks to increase the marketer’s overall percentage or share of the market. In many cases, this can only be accomplished by taking sales away from competitors. Consequently, this strategy often relies on aggressive marketing tactics.
3. Niche Market
This strategy looks to obtain a commanding position within a certain segment of the overall market. Usually the niche market is much smaller in terms of total customers and sales volume than the overall market. Ideally this strategy looks to have the product viewed as being different from that of organizations targeting the larger market (i.e., focus on product positioning).
This strategy looks to maintain the marketer’s current position in the market, such as maintaining the same level of market share.
This strategy looks to remove the product from the organization’s product mix. This can be accomplished by: 1) selling the product to another organization, or 2) eliminating the organization’s product offerings
Decision Area Strategies
These are used to achieve the General Marketing Strategies by guiding the decisions within important marketing areas (product, pricing, distribution, promotion, target marketing). For example, a General Marketing Strategy that centers on entering a new market with new products may be supported by Decision Area Strategies that include:
Target Market Strategy – employ segmenting techniques
Product Strategy – develop new product line
Distribution Strategy – use methods to gain access to important distribution partners that service the target market
Promotion Strategy – create a plan that can quickly build awareness of the product
Pricing Strategy – create price programs that offer lower pricing versus competitors
Achieving the Decision Area Strategies is accomplished through the development of detailed Tactical Programs for each area. For instance, to meet the Pricing Strategy that lowers cost versus competitors’ products, the marketer may employ such tactics as: quantity discounts, trade-in allowances, or sales volume incentives to distributors.
Extensive coverage of how to use these strategies as part of a Tactical Program can be found in the How to Write a Marketing Plan Tutorial.