Tour 09 Tourism Promotions and Marketing

Chapter 4
Strategic Marketing Planning

CHAPTER OBJECTIVES
• Explain companywide strategic planning and its principal steps.
• Describe how companies develop mission statements and objectives.
• Explain how companies evaluate and develop their ‘business portfolios’.
• Explain marketing’s role in strategic planning.
• Describe the marketing management process and the brand plan.
• Show how marketing organizations are changing.


Strategic Planning Process
Strategic Planning involves developing an overall company strategy for long-run survival and growth.

This process involves:
• Defining a Mission: Statement of an organization’s purpose; should be market oriented.
• Setting Company Objectives: Supporting goals and objectives to guide the entire company.
• Designing a Business Portfolio: Collection of businesses and products that make up the company.
• Planning Functional Strategies: Detailed planning for each department designed to accomplish strategic objectives.

STRATEGIC PLANNING
Strategic planning is the process of developing and maintaining a feasible fit between the organization’s objectives, skills, and resources and its changing marketing opportunities.

Strategic planning is the process of developing and maintaining a strategic fit between the organization’s goals and capabilities and its changing marketing opportunities. It relies on developing a clear company mission, supporting objectives, a sound business portfolio and coordinated functional strategies.

Overview of planning
Formal planning can yield many benefits for all types of companies, large and small, new and mature. It encourages systematic thinking. It forces the company to sharpen its objectives and policies, leads to better coordination of company efforts, and provides clearer performance standards for control.
Companies usually prepare annual plans, long-range plans, and strategic plans:
• Annual plans- short-term plan that describes the current situation, company objectives, the strategy for the year, the action program, budgets and controls.
• Long-range plan- describes the primary factor and forces affecting the organization during the next several years. It includes the long-term objectives, the main marketing strategies used to attain them and the resources required.
• Strategic plan- involves adapting the firm to take advantage of the opportunities in its constantly changing environment.

Reasons for Planning
• If we do not know where we are going any road will take us there.
• The essence of strategic planning is the consideration of current decision alternatives in the light of their probable consequence over time.
• The future is unpredictable but it is not a random walk.

THE STRATEGIC PLAN
Strategic plan is a plan that describes how a firm will adapt to take advantage of opportunities in its constantly changing environment, thereby maintaining a strategic fit between the firm’s goals and capabilities and its changing market opportunities.

The strategic plan contains several components: the mission, the strategic imperatives, the strategic audit, SWOT analysis, objectives and strategies. All of these feed from and feed into marketing plans.

The mission
The mission should define the competitive scopes within which the company will operate. Industry scope, products and applications scope, competencies scope, market-segment scope, and vertical scope.
• Industry scope- the range of the industries that the company will consider. Some companies will operate in only one industry, some in only a set of related industries, some in only hotels, some in airlines, and some in any industry.
• Products and application scope- the range of products and applications in which the company will participate.
• Competencies scope- the range of technological and other core competencies that the company will master and leverage.
• Market-segment scope- the type of market or customers the company will serve. Some companies will serve only the upscale market.
• Vertical scope- the number of channel levels from raw materials to final product and distribution in which the company will engage.
• Geographic scope- the range of regions, countries, or country groups where the corporation will operate.

A mission statement is a statement of the organization’s purposes—what it wants to accomplish in the larger environment. A clear mission statement acts as an ‘invisible hand’ that guides people in the organization so that they can work independently and yet collectively towards overall organizational goals.

Mission
• What business are we in? What businesses should we be in? What do we do best? What are the values/ethics of the firm?
• Define business by need rather than product.
• Lodging vs. hotel
• Quick service restaurants vs. fast food hamburgers
• Marketing myopia - Transportation vs. railroad

Management should avoid making its mission too narrow or too broad. A mission should be:
• Realistic.
• Specific. It should fit the company and no other.
• Distinctive competencies.
• Motivating. It should give people something to believe in.
• Fit market environment.
• Market oriented.

Strategic objectives
The company’s mission needs to be turned into strategic objectives and be responsible for reaching them. The mission states the philosophy and direction of a company whereas the strategic objectives are measurable goals.

Strategic imperatives
Are objectives or defined practices
Companies have plans at many levels: global, regional, national, and so forth. The higher-level plans contain objectives and strategies that become part of subordinate plan.

Strategic audit
It reviews the company and its environment.
It covers the gathering of this vital information. It is the intelligence used to build the detailed objectives and strategy of the business. It has two parts:
1. External audit- or marketing environment audit examines the microenvironment and task environment of the company.
2. Internal audit- examines all aspects of the company. It covers the whole value chain. It includes the primary activities that follow the flow of goods or services through the organization.


SWOT analysis
A distillation of the findings of the external and internal audit which draws attention to the critical organizational strengths and weaknesses and the opportunities and threats facing the company.
The SWOT analysis draws the critical strengths, weaknesses, opportunities and threats (SWOT) from the strategic audit. The audit contains a wealth of data of differing importance and reliability. The SWOT analysis distils these data to show the critical items from the internal and external audit

Opportunities and threats
Managers need to identify the main threats and opportunities that their company faces. The purpose of the analysis is to make the manager anticipate important developments that can have an impact on the firm.

Strengths and weaknesses
The strengths and weaknesses in the SWOT analysis do not list all features of a company but only those relating to critical success factors. (The strengths and weaknesses that most critically affect organization’s success. These are measured relative to competition). A list that is too long betrays a lack of focus and an inability to discriminate what is important. The strengths or weaknesses are relative, not absolute. It is nice to be good at something, but it can be a weakness if the competition is stronger.

The business portfolio
From here, strategic planning calls for analyzing the company’s business portfolio and deciding which businesses should receive more or fewer resource.

Designing the Business Portfolio
The company must:
• Analyze its current business portfolio or Strategic Business Units (SBU’s)
• Decide which SBU’s should receive more, less, or no investment
• Develop growth strategies for adding new products or businesses to the portfolio

The business portfolio is the collection of businesses and products that make up the company.
It is a link between the overall strategy of a company and those of its parts. The best business portfolio is the one that fits the company’s strengths and weaknesses to opportunities in the environment. The company must (1) analyze its current business portfolio and decide which businesses should receive more, less, or no investment, and (2) develop growth strategies for adding new products or businesses to the portfolio.


Figure 3.4 Product/market expansion grid.
















USEFUL MARKETING TERMS

• Fixed costs- costs that do not vary with production or sales level.
• Variable costs- costs that vary directly with the level of production.
• Product mix- (or product assortment) the set of all products lines and items that a particular seller offers for sale to buyers.
• Price- the amount of money charged for a product or service, or the sum of the values that consumers exchange for the benefits of having or suing the product or service.
• Value in use pricing- setting prices that will capture some of what customers will save by substituting the firm’s product for the one currently used.
• Value pricing- setting a fair price level for a marketing mix that really gives customers what they need.
• Value- (monetary worth) an amount expressed in money or another medium of exchange that is thought to be a fair exchange for something
• Market penetration- a strategy for increasing sales of current products to current market segments. This is achieved by winning over competitors’ customers, acquiring a competitor, and/or by increasing product usage rate.
• Market development- looks for new markets in which current products can expand.
• Product development- a strategy for company growth by offering modified or new products to current market segments. Developing the product concept into a physical product in order to ensure that the product idea can be turned into a workable product.
• Product idea- An idea for a possible product that the company can see itself offering to the market.
• Diversification- a strategy for the company growth by starting up or acquiring businesses outside the company’s current products and markets.



THE MARKETING PROCESS

The strategic plan defines the company’s overall mission and objectives. Within each business unit, marketing plays a role in helping to accomplish the overall strategic objectives. Marketing’s role and activities in the organization are shown in Figure 3.5. It summarizes the marketing process and the forces influencing marketing strategy.

Figure 3.5 Influences on marketing strategy.



















Market analysis
Managing the marketing function begins with a complete analysis of the company’s situation. The company must analyze its market and marketing environment to find attractive opportunities and to avoid environmental threats. It must analyze company strengths and weaknesses, as well as current and possible marketing actions, to determine which opportunities it can best pursue. Marketing analysis feeds information and other inputs to each of the other marketing management functions.

Marketing planning
Through strategic planning, the company decides what it wants to do with each business unit. Marketing planning involves deciding marketing strategies that will help the company attain its overall strategic objectives. Marketing product or brand plans are at the center of this.



Implementation
Implementation turns strategic and marketing plans into actions that will achieve the company’s objectives. Marketing plans are implemented by people in the marketing organization who work with others both inside and outside the company.

Control
Control consists of measuring and evaluating the results of marketing plans and activities and taking corrective action to make sure objectives are being reached. Marketing analysis provides information and evaluations needed for all the other marketing activities.
















Figure 3.6 Market analysis, planning, implementation and control


Marketing strategy
Target consumers are at the center of the marketing strategy. The company identifies the total market, divides it into smaller segments, selects the most promising segments and focuses on serving them. It designs a marketing mix using mechanisms under its control: product, price, place, promotion. The company engages in marketing analysis, planning, implementation and control to find the best marketing mix and to take action. The company uses these activities to enable it to watch and adapt to the marketing environment.
A marketing strategy specifies a target market and a related marketing mix. It is a big picture of what a firm will do in some market. Two interrelated parts are needed:
1. a target market- a fairly homogenous (similar) group of customers to whom a company wishes to appeal.
2. a marketing mix- the controllable variables the company puts together to satisfy this target group.

Target consumers
To succeed in today’s competitive marketplace, companies must be customer centered—winning customers from competitors by delivering greater value. However, before it can satisfy consumers, a company must first understand their needs and wants. So, sound marketing requires a careful analysis of consumers. Companies know that they cannot satisfy all consumers in a given market—at least not all consumers in the same way.

Demand measurement and forecasting
Suppose a company is looking at possible markets for a potential new product. First, the company needs to estimate the current and future size of the market and its segments. To estimate current market size, the company would identify all competing products, estimate the current sales of these products, and determine whether the market is large enough to profitably support another product.
Equally important is future market growth. Companies want to enter markets that show strong growth prospects. Growth potential may depend on the growth rate of certain age, income, and nationality groups that use the product.

Market segmentation
If the demand forecast looks good, the company next decides how to enter the market. The market consists of many types of customers, products and needs. The marketer has to determine which segments offer the best opportunity for achieving company objectives. Consumers are group based in various ways based on geographic factors (countries, region, and cities); demographic factors (sex, age, income, education); psychographic factors (social classes, lifestyle); behavioral factors (purchase occasions, benefits sought, and usage rates). The process of dividing a market into groups of buyers with different needs, characteristics, or behavior who might require separate products or marketing mixes is market segmentation.
Market segment- A group of consumers who respond in a similar way to a given set of marketing stimuli.

Differential advantage
It is a sustainable internal or external strength it has over its competitors. There are five chief sources of differential advantage.
1. Product
2. Position
3. Value chain
4. Organization
5. Finance

Market targeting
It involves evaluating each market segment’s attractiveness and selecting one or more segments to enter. A company should target segments in which it has a differential advantage over its competitors; where it can generate the greatest customer value and sustain it over time. A company with limited resources might decide to serve only one or a few special segments; this strategy limits sales, but it can be profitable. Alternatively, a company might choose to serve several related segments—perhaps those with different kinds of customers but with the same basic wants. Or perhaps a large company might decide to offer a complete range of products to serve all market segments.

Positioning
It is the place the product occupies in consumers’ minds.
If a product were perceived to be exactly like another product on the market, consumers would have no reasons to buy it.
Market positioning gives a product a clear, distinctive, and desirable place in the minds of target consumers compared with competing brands. Marketers plan positions that distinguish their products from competing brands and give them the greatest strategic advantage in their target markets.
For example:
Ford says, “Everything we do is driven by you”.
“You can’t go wrong” with a Volvo.
Mercedes is “Engineered like no other car in the world”.
BMW is “the ultimate driving machine”.
Jaguar is positioned as “A blending art and machine”
Such simple statements are the backbone of a product’s marketing strategy.
In positioning its product, the company first identifies possible competitive advantages upon which to build the position. To gain competitive advantage, the company must offer greater value to chosen target segments, either by charging lower prices than competitors or by offering more benefits to justify higher prices. However, if the company positions the product as offering greater value, it must deliver greater value. Effective positioning begins with actually differentiating the company’s marketing offer so that it gives consumers more value than offered by the competition.