4.2 Marketing Planning

Chapter 25

Part 1

Marketing Planning

A formal document which outlines the details of how a business plans to achieve its marketing objectives as derived from its corporate objectives.

Marketing Mix

Effectively combining key decisions in the areas of product, price, promotion, and place to successfully market a product.

The 4 P’s of Marketing

Product

Price

Promotion

Place

Product

The right product could include:An existing product

An updated existing product

A new product

Price

The right price must be set for the productToo low – the product quality may be perceived as low quality

Too high – the customer may not be able to afford the product

Can you identify a product that fits into a too LOW price and a too HIGH price category?

Promotion

Telling your customer about your product and convincing them to buy.

Packaging is considered part of promotion and can reinforce image or create a product preference.

Can you think of any promotion activities that encouraged you to make a purchase?

Can you think of any creative packaging that would make you purchase one product over another?

Place

Distributing the product to the proper PLACE so customers can make a purchase.

If your product is not available at the right time and place, customers cannot buy it.

Where might you make purchases?How is “PLACE” changing?

The 3 other P’s

There are 3 more P’s – related to Service

People: Selling services require people to create a positive experience for the customer (restaurants, hair salons)

Process: Satisfying customer needs as part of marketing services (automatically renewing a membership)

Physical Evidence: Customers can see for themselves the quality of the product (a clean lobby at a hotel, table clothes used a nice restaurant)

Successful Marketing Mix

The marketing mix must be consistent in order to be successful in sending a clear message to customers.

Example: McDonald’sProduct: Fast FoodPrice: Inexpensive to moderatePromotion: Billboards, road signs, TV commercialsPlace: Convenient, busy streets

People: FAST service, Order takersPhysical Evidence: Clean

What is wrong with this picture?

An expensive well-known brand of perfume for sale by a street-vendor.

Saks Fifth Avenue wrapped your fine china purchase in newspaper.

Lamborghini sports cars are advertised in Seventeen magazine.

Marketing Ethics

Ethical marketing issues are increasing with the globalization of the world’s markets.

What do you think of these situations?Sell a printer cheaply or give it away to sell expensive ink cartridges.

Advertise low airfare then add taxes and surcharges after the purchase has been made.

What do you think?

Advertise toys to children and not clearly distinguish between and advertisement and children’s programming.Close retail stores and only sell on the Internet when your customer base historically does not use computers.Buy cheap raw materials to decrease a products price.

Marketing Audit

A regular review of the cost and effectiveness of a marketing plan including the analysis of external and internal influences.

Marketing Audit

A marketing audit answers the question:What is our current situation?

3 Factors:Examine INTERNAL strengths and weaknessesExamine EXTERNAL opportunities and threatsReview progress of the plan:

Market share – how does it compare with the objectiveActual sales performance – is it meeting original sales goalsIs the company meeting its SMART objectives

Porter’s Five Forces

A framework that helps industries analyze competition in the market place and understand the elements involved.1. Threat of entry2. The power of buyers3. The power of suppliers4. The threat of substitutes5. Competitive rivalry

HL

Porter’s 5 Forces

Supplier Power

Buyer Power

Threat of Entry Threat of SubstitutesCompetitiveRivalry

HL

1. Threat of Entry

The ease that other businesses can join the industry.

Threat is highest when:Economies of scale are low in the industryTechnology needed to enter the business is relatively cheapDistribution channels are easy to accessThere are no legal or patent restrictionsThe importance of product differentiation is low so extensive advertising is not required.

Name a business that fits this description.

HL

2. The power of buyers

The power that customers have on the industry.

Customer buyer power is greatest when:There are many small undifferentiated firms to buy from.The cost of switching suppliers is low.Buyers can easily buy from other businesses.

Name a business that fits this description.

HL

3. The power of suppliers

The power of suppliers to businesses is great.

Supplier power is greatest when:The cost of switching suppliers is high.The brand being sold is well-known (or powerful) like Nike shoesSuppliers could realistically open their own forward-integration operations (coffee suppliers open their own cafes)

Name a business that fits this description.

HL

4. The threat of substitutes

The existence of substitutes (replacing metal with plastic….NOT substituting brands – Honda cars with Ford cars)

Substitute threats exist when:New technology makes other options available

Satellite TV replaces antenna receptionPrice competition forces customers to consider alternatives

Train fare is cheaper than airfareNew products lead to consumers spending on different products leaving less to be spent on your product.

Paying for Internet service reduces the amount spent on clothing.

Name a business that fits this description.

HL

5. Competitive Rivalry - CENTER

Competition from your competitors.

Competition is greatest when threats exist from the four elements of Porter’s 5 Forces.

1. Threat of entry – easy to enter the market2. Threat of substitute products – alternatives3. Suppliers have power4. Customers have power

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5. Competitive Rivalry - CENTER

Competition from your competitors.

Rivalry from existing firms is greatest when:

There are many firms with a similar market share – Think Coke vs PepsiHigh fixed costs force firms to try to obtain economies of scale – Think Toyota vs HondaThere is slow market growth that forces firms to take market share from their rivals to increase sales – Think Bank of America vs Wells Fargo

Can you think of other examples?

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Porter’s 5 Forces

How does this impact business decision making?By analyzing new markets potential.By analyzing existing markets.Develop strategies to improve a businesses current market position and gain a competitive advantage.

Product differentiationPatents and copyrightsFocus on less competitive market segmentsMerging with suppliers or customersSigning exclusive agreements with suppliers and commit customers to long-term contracts.

HL