What is Marketing Planning and Why is it Important?

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Marketing Planning: Definition, Scope, Importance, Elements & Challenges

Marketing planning is a fundamental management function that underpins all marketing and business activities within an organization. Given the dynamic nature of the business environment, its role has become increasingly vital.

What is Marketing Planning?

Marketing planning is a structured process involving:

• Analyzing the current situation and market opportunities: Understanding the present landscape.
• Forecasting and establishing planning premises: Predicting future trends and setting the groundwork.
• Selecting target markets: Identifying specific customer groups.
• Determining marketing objectives: Defining clear goals.
• Designing and developing marketing strategies: Creating action plans to achieve objectives.
• Allocating resources: Distributing assets to marketing efforts (marketing mix).
• Developing procedures and policies: Establishing guidelines for operations.

Essentially, planning involves deciding in advance: what, how, when, and who will perform tasks to achieve an objective. It acts as a bridge between the current state and desired future. Marketing planning is considered by many experts to be synonymous with overall business planning due to its focus on successful market management.

Why is Marketing Planning Essential?

“It is planning, not gambling, that produces profits and security.” Organizations face increasingly fragmented, complex, and rapidly changing markets, leading to conflicting pressures between business objectives (e.g., customer service vs. profitability, short-term profit vs. long-term value, revenue maximization vs. cost minimization).

Marketing planning helps management by:

• Identifying and clarifying business priorities: Preventing internal confusion and missed opportunities.
• Improving market information: Providing usable data for decision-making.
• Enhancing inter-functional coordination: Reducing waste and duplication of resources.
• Increasing overall business control: Offering a clearer understanding of objectives.

Without an effective marketing planning system, companies can experience:

• Lost profit opportunities
• Meaningless numbers in plans
• Unrealistic objectives
• Lack of actionable market information
• Inter-functional strife
• Management frustration
• Product and market proliferation
• Wasted promotional expenditure
• Pricing confusion
• Growing vulnerability to environmental change
• Loss of business control

Scope of Marketing Planning: Long-Term vs. Short-Term

Marketing planning activities are typically categorized by time:

Long-Term Marketing Planning

This involves developing core objectives and strategies to guide future company efforts over two to twenty years. Top management usually handles this with specialized planning authorities. Key considerations include:

• Diagnosis: Assessing the current market situation and contributing factors (where the company stands and why). This requires analyzing sales, market shares, costs, plant utilization, and profit levels.
• Prognosis: Estimating the company’s future trajectory if current trends continue (sales, profits, revenues, costs, investments, ROI). This helps determine if current policies should continue or be modified.
• Objectives: Setting new goals if the prognosis indicates a bleak future.
• Strategy: Defining broad principles to gain competitive advantage, attract buyers, and exploit company resources (e.g., high-quality products, premium pricing, heavy advertising).
• Tactics: Specific methods for implementing strategies. Objectives define “where to be,” strategy “the route,” and tactics “how to execute.”
• Control: Monitoring performance targets periodically and introducing changes if variations are unfavorable. Contingency plans may also be developed to address new challenges.

Short-Term or Annual Marketing Planning

Companies prepare annual plans within the framework of their long-range plans. These should progressively implement the long-term vision, rather than being reactive to past results. Three common approaches exist:

• Goal Planning: Setting sales and profit goals to satisfy shareholders, with managers finding ways to achieve them.
• Optimization Planning: Considering alternative strategies and their impact on profits, sales, market shares, and investment opportunities, then selecting the most attractive.
• External Planning: Estimating likely profits and sales from continuing the current strategy, and establishing these as goals if satisfactory.

Nature of Marketing Planning

The term “marketing plan” can have varied meanings across organizations. It might refer to an overall market-oriented business plan, a section within a larger business plan focusing on marketing, or a specific document for a particular marketing goal (e.g., new product launch).

More specific designations for different types of plans include:

• Divisional Plan: A plan for growth and profitability within a specific division, similar to a corporate plan but focused on the division’s marketing, financial, manufacturing, and personnel strategies.
• Corporate Plan: The overall business plan for the corporation, dealing with missions, growth strategies, portfolio decisions, and objectives.
• Product-Line Plan: Objectives, strategies, and tactics for a specific product line, prepared by the product-line manager.
• Product Plan: Objectives, strategies, and tactics for a particular product or category, prepared by the product manager.
• Product/Market Plan: Marketing a specific product or line within a particular industrial or geographical market.
• Brand Plan: Objectives, strategies, and tactics for a specific brand, prepared by the brand manager.
• Market Plan: Developing and serving a particular market, prepared by market managers if they exist alongside product managers.
• Functional Plan: Plans for major functions like marketing, manufacturing, finance, or sub-functions within marketing (e.g., advertising, sales promotion, sales force, marketing research).

The marketing component is crucial in most plans, often serving as the foundation for other departmental plans (manufacturing, finance, personnel).

Key Elements of a Marketing Plan

A marketing plan typically comprises four major elements:

1. Objectives or Goals: Statements of company goals, including forecasts for sales, market share, profits, and expenses (e.g., a 5% market share increase, 20% sales turnover increase). The ultimate goal is usually increased profits.
2. Programs: Detailed action plans outlining responsibilities for each department involved in marketing efforts. These aim to achieve set goals within a specified period and can include product development, advertising, sales promotion, and physical distribution programs.
3. Completion Schedule: A timetable for starting and completing marketing activities, with fixed deadlines to ensure timely project progress.
4. Budgeting: A quantified plan indicating resources allotted for specific marketing purposes. This helps inter-balance marketing mix components and serves as a basis for control, ensuring plans are carried out within permissible costs.

Types of Marketing Sub-Plans

Several sub-plans are prepared for successful implementation of marketing programs:

• Product Mix Plan: Decisions related to product elimination, adding new products, or developing existing ones, especially crucial in industries with complex and changing technologies.
• Distribution Channel Plan: Future actions regarding the number, forms, management, and remuneration of distribution channels.
• Marketing Research Plan: Gathering, reducing, and analyzing market data to describe and evaluate demand, buyer behavior, and competition, leading to more rational decision-making and optimal resource allocation.
• Marketing Organization Plan: Planning for the structure of the marketing department, communication policies, and coordination with other departments.
• Sales Force Plan: Decisions on hiring, training, motivating, compensating salespeople, assigning quotas, and determining sales territories.
• Advertising and Sales Promotion Plan: Selection of advertising media, sales promotion techniques, and advertising strategies and tactics, primarily concerned with the promotion mix.
• Pricing Plan: Considering different pricing policies, strategies, and legal constraints related to pricing.

Importance of Marketing Planning

A marketing plan is vital for setting strategies, achieving objectives, and monitoring performance. Its importance can be summarized as:

1. Facing Future Uncertainties: Provides protection against unforeseen risks by making forecasts based on careful analysis and considering potential future situations (e.g., new competitors).
2. Providing Focus to Marketing Activities: Aligns various activities, programs, and operations towards achieving marketing goals and overall business success.
3. Best Utilization of Opportunities: Helps identify and seize future opportunities before competitors, by monitoring the business environment for emerging consumer needs.
4. Determination of the Right Marketing Mix: Helps determine the appropriate combination of product, price, place, and promotion to create maximum customer appeal.
5. Better Coordination: Aligns marketing department activities with overall company objectives, fostering coordination across all departments.
6. Customer Satisfaction: Directs marketing efforts towards understanding and satisfying customer wants, often based on extensive consumer research.

Approaches to Marketing Planning

Different approaches guide marketing planning:

1. Profit Impact of Marketing Strategies (PIMS): Identifies key variables affecting profits (e.g., market share) by analyzing data from numerous business units. High market share is often linked to higher profitability due to economies of scale, market power, and better management.
2. Portfolio Models: These models help analyze a company’s portfolio of businesses or products.
   • Boston Consulting Group (BCG) Approach: Categorizes Strategic Business Units (SBUs) into Stars (high growth, high market share), Cash Cows (low growth, high market share), Question Marks (high growth, low market share), and Dogs (low growth, low market share) based on market growth rate and relative market share.
   • General Electric (GE) Model: An improvement over BCG, relating market attractiveness (competition, government policy, ROI, technology, market size, growth) to SBU/firm strengths (R&D, finance, distribution, market share, quality, customer service). It uses a nine-cell matrix to recommend investment, selectivity, or divestment.
   • Arthur D. Little Life Cycle Portfolio Matrix: Assumes industries have life cycles (embryonic, growth, mature, aging) and firms occupy competitive positions (dominant, strong, favorable, tenable, weak, non-viable).
   • Shell’s Directional Policy Matrix: Uses business sector profitability prospects (unattractive, average, attractive) and competitive capability (weak, average, strong) to suggest nine strategies (e.g., disinvest, cash generation, growth, leader).
3. Competitive Analysis: Understanding competitors’ strategies and positioning to inform one’s own planning.

Components of Marketing Planning

Key components of marketing planning involve preparation, people, the plan itself, and the process:

• Preparing to Plan: Dedicating time and resources is crucial to avoid mistakes and ensure decisions are based on reliable information. This involves distinguishing between strategic (market position, competitive advantage, objectives, resources) and tactical (detailed scheduling and costing of specific actions) planning. Tactical plans should always follow strategic plans.
• Who Should Be Involved?: Individuals who will use the plan and those who can contribute knowledge should be involved. A planning manager should lead the process, ensuring clear communication and proper completion.
• Criteria of a Good Marketing Plan: A good plan captures the essentials of the planning process concisely and is a comprehensive working document. It should include: Mission statement, Financial summary, Market overview (marketing audit summary), SWOT analysis, Assumptions, Marketing objectives and strategies, and Programs with forecasts and budgets. It should be well-written, short, and usable as a background for ongoing operational decisions.
• Criteria of an Effective Marketing Planning Process: Success is measured not just by the plan’s production, but also by identifying insufficient information, promoting clear thinking, and improving team working. This often takes two to three years to fully install within an organization.
• International Planning: Requires additional considerations like product standardization/adaptation, packaging/labeling (cultural, legal), brands/trademarks (global/national, legal), and warranty/service (international customers, quality, service networks). Mistakes in international marketing can be costly.

Other components

• Planning for Key Accounts: Treat key accounts as distinct segments, preparing separate sub-plans to build and strengthen relationships. This plan should address the key account’s decision-making unit, objectives, market background, opportunities/threats, and strengths/weaknesses (based on critical success factors). It may be a joint process with the customer.
• IT in Planning: Software packages can assist with marketing planning elements, offering benefits such as:
  • Guidance: On-screen prompts and help pages guide users.
  • Standardization: Provides consistency across large organizations and supports consolidation.
  • Presentation: Incorporates visual aids like charts and tables for clarity.
  • Contingency Planning: Easier manipulation for “what if” scenarios.
  • Caution: Software is a decision support tool, not a substitute for critical thinking (“garbage in, gospel out”).

Marketing Planning System

An organization’s marketing planning system reflects its managerial philosophy and can be focused on different aspects:

1. Product-Oriented Marketing Organization: Planning is done separately for each product, with individual targets, programs, and expenditures (advertising, sales promotion, product development, research).
2. Customer-Oriented Marketing Organization: Separate plans are prepared for each customer class, centered on their characteristics and needs. Objectives are fixed according to customer categories (e.g., different cosmetics for different age groups).
3. Market-Oriented Marketing Organization: Regionally based planning with different targets and plans for distinct regions, considering local competition and product characteristics (e.g., global restaurant chains adapting menus to local preferences).
4. Function-Oriented Marketing Organization: Consolidated plans are integrated from smaller plans for each marketing function (e.g., product mix, sales force, advertising, distribution, pricing, market research, organization).

Implementing Marketing Planning

Many plans fail at the implementation stage due to difficulties in execution or lack of commitment. Successful implementation requires everyone involved to be informed and committed.

Challenges to Implementation:

• External Factors: Changes in the macro and micro-environment can threaten plans, requiring modification or complete change.
• Internal Factors: The marketing department competes for limited resources and depends on other departments, necessitating internal cooperation.

Common Problems in Strategic Marketing Plan Implementation:

• Lack of CEO and Top Management Support: Essential for gaining support from other functional managers.
• Lack of Internal Marketing Plans: Marketing plans need to be “sold” internally to employees to secure commitment and ensure consistent customer experience.
• Lack of Line Management Support: Operational managers may resist, requiring special attention and effort to secure their support.
• Confusion over Planning Terms: Academic jargon can alienate line managers; clear explanations and separate meetings are helpful.
• Too Much Detail: Excessive paperwork can be boring; focus on main issues when communicating the plan.
• Once-a-Year Ritual: Planning should be an ongoing, integrated part of a manager’s job, not just an annual event.
• Separation of Operational Planning from Marketing Plans: Managers can become too operationally focused, losing sight of strategic marketing and long-term needs.
• Failure to Integrate Marketing Planning: Needs to be integrated into the total corporate planning system, alongside finance, production, R&D, etc.
• Delegation of Planning to a Planner: Exclusive delegation can lead to indifference during implementation; involve relevant managers at all possible stages.

Effective leadership from the CEO downwards is crucial to address these challenges and ensure proper implementation.

Key Elements of Implementation Program:

1. Leadership: Senior management must take ultimate responsibility, commit to the strategic plan, allocate responsibility and authority, and establish checkpoints (deadlines, resource availability, supply assurance). Marketing leadership is essential for motivating others.
2. Internal Marketing: Before marketing to external customers, a business must market its value proposition to internal customers (employees). This involves:
   • Internal Marketing Objectives and Strategy: Setting goals and strategies for internal programs.
   • Segmenting the Internal Market: Identifying supporters, opponents, and non-involved individuals to tailor communication.
   • Developing an Internal Marketing Mix: The “product” is the plan/change, “price” involves costs/benefits to staff, “place” is the distribution/timing of the plan, and “promotion” is effective communication.
   • Important Skills: Negotiation (agreeing on mutually agreeable outcomes with internal and external parties), persuasion (convincing units and departments to support the plan), and cooperation (securing collaboration from all within the organization).
3. Project Management: Implementing a marketing plan often involves managing projects—undertakings with a beginning and end, carried out to meet goals within cost, schedule, and quality objectives (e.g., launching a new product, setting up a distribution network).
4. Objectives of Project Management: Quality (conforming to intended results), budget (within permitted costs), and time schedule (accomplished within the timeframe).
5. The Project Manager: Coordinates resources (staff, money, time) and has principal duties including:
   • Project Planning: Developing targets, dividing activities, and delegating.
   • Delegation & Team Building: Assigning activities to individuals and teams.
   • Coordination & Communication: Reporting to superiors and maintaining dialogue with team members.
   • Monitoring & Control: Ensuring smooth progress and addressing problems promptly.
   • Resolving Problems: Seeking counsel, handling issues, or delegating problem-solving.
   • Quality Control: Ensuring quality is maintained throughout, as it leads to profitable markets and job security.

Other Elements

1. Project Planning Tools:
   • Schedule of Activities: Ensures jobs are performed as scheduled, minimizing resource constraints.
   • Estimate of Time: Duration for each work unit, earliest and latest start times.
   • Gantt Charts: Bar line charts used for planning and tracking progress.
2. Managing Change: Businesses must constantly adapt to external environmental changes (competitors, customers, law, society, economy) by implementing internal changes to maximize strengths and mitigate weaknesses.
3. Aspects of Change: Includes changes in the environment, product/service portfolio, production/service delivery methods, corporate relations (leadership, employee relations, training), and organizational structure (divisions, SBUs, centralization).
4. Questioning the Effectiveness of Change: Evaluating if change contributes to marketing goals, solves problems, and initiates better customer care, team spirit, and performance.

Benefits of Marketing Planning

Formalized marketing planning is a structured process to define a company’s competitive stance. It helps ensure future hopes are realistic, relevant, and widely understood. Even companies with formalized procedures sometimes fail to produce integrated plans if they focus too much on procedures rather than useful information.

Companies find that formalized marketing planning offers these benefits:

• Coordination: Harmonizes activities of many interrelated individuals.
• Identification of Developments: Helps anticipate future trends.
• Preparedness: Equips the company to meet changes when they occur.
• Minimization of Non-Rational Responses: Reduces impulsive reactions to unexpected events.
• Better Communication: Improves executive communication.
• Minimization of Conflict: Reduces individual conflicts that might undermine company goals.

Barriers to Marketing Planning

When marketing planning fails, it’s often because companies overemphasize procedures and paperwork rather than generating useful information. Delegating planning to a junior planner or outsourcing can also be disastrous, as planning for line management cannot delegated. Planners should assist those responsible for implementation. Failures also arise from attempting too much, too quickly, or without proper staff training.

Common barriers to implementing marketing planning include:

• Weak chief executive and top management support.
• Absence of a “plan for planning.”
• Lack of line management support (hostility, lack of skills/information/resources, inadequate structure).
• Confusion over planning terminology.
• Focusing on numbers instead of written objectives and strategies.
• Excessive detail, too far in advance.
• Treating it as a “once-a-year ritual.”
• Separation of operational and strategic planning.
• Failure to integrate marketing planning into a total corporate planning system.
• Delegating planning solely to a planner.

Addressing these barriers, especially securing top-level buy-in early and providing training, is essential for successful marketing planning.