Marketing Plan: Environmental Analysis

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This sample marketing plan for a hypothetical company illustrates how the marketing plan-

ning process described in Chapter 2 might be implemented. If you are asked to create a mar-

keting plan, this model may be a helpful guide, along with the concepts in Chapter 2 .

Star Software Inc. Marketing Plan

I. EXECUTIVE SUMMARY

Star Software Inc. is a small, family-owned corporation in the first year of a transition from

first-generation to second-generation leadership. Star Software sells custom-made calendar

programs and related items to about 400 businesses, which use the software mainly for promo-

tion. As Star’s business is highly seasonal, its 18 employees face scheduling challenges, with

greatest demand during October, November, and December. In other months, the equipment

and staff are sometimes idle. A major challenge facing Star Software is how to increase profits

and make better use of its resources during the off-season.

An evaluation of the company’s internal strengths and weaknesses and external oppor-

tunities and threats served as the foundation for this strategic analysis and marketing plan.

The plan focuses on the company’s growth strategy, suggesting ways it can build on existing

customer relationships, and on the development of new products and/or services targeted to

specific customer niches. Since Star Software markets a product used primarily as a promo-

tional tool by its clients, it is currently considered a business-to-business marketer.

II. ENVIRONMENTAL ANALYSIS

Founded as a commercial printing company, Star Software Inc. has evolved into a marketer of

high-quality, custom-made calendar software and related business-to-business specialty items.

In the mid-1960s, Bob McLemore purchased the company and, through his full-time commit-

ment, turned it into a very successful family-run operation. In the near future, McLemore’s

37 -year-old son, Jonathan, will take over as Star Software’s president and allow the elder

McLemore to scale back his involvement.

A. The Marketing Environment 1. Competitive forces. The competition in the specialty advertising industry is very

strong on a local and regional basis but somewhat weak nationally. Sales figures for

the industry as a whole are difficult to obtain since very little business is conducted on

a national scale.

The competition within the calendar industry is strong in the paper segment and weak

in the software-based segment. Currently, paper calendars hold a dominant market share

of approximately 65 percent; however, the software-based segment is growing rapidly.

The 35 percent market share held by software-based calendars is divided among many

Sample Marketing Plan

The Executive Summary, one of the most frequently read components of a marketing plan, is a synopsis of the marketing plan. Although it does not provide detailed information, it does present an overview of the plan so readers can identify key issues pertain- ing to their roles in the planning and implementation processes. Although this is the first section in a marketing plan, it is usually written last.

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The Environmental Analysis presents information regarding the organization’s current situation with respect to the marketing environment, the current target market(s), and the firm’s current marketing objec- tives and performance.

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This section of the envi- ronmental analysis considers relevant external environmental forces, such as competitive, economic, political, legal and regulatory, technological, and sociocultural forces.

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different firms. Star Software, which holds 30 percent of the software-based calendar

market, is the only company that markets a software-based calendar on a national basis.

As software-based calendars become more popular, additional competition is expected to

enter the market.

2. Economic forces. Nationwide, many companies have reduced their overall promotion budgets as they face the need to cut expenses. However, most of these reductions have

occurred in the budgets for mass-media advertising (television, magazines, and newspa-

pers). While overall promotion budgets are shrinking, many companies are diverting a

larger percentage of their budgets to sales promotion and specialty advertising. This trend

is expected to continue as a weak, slow-growth economy forces most companies to focus

more on the “value” they receive from their promotion dollars. Specialty advertising, such

as can be done with a software-based calendar, provides this value.

3. Political forces. There are no expected political influences or events that could affect the operations of Star Software.

4. Legal and regulatory forces. In recent years, more attention has been paid to “junk mail.” A large percentage of specialty advertising products are distributed by mail, and some

of these products are considered “junk.” Although this label is attached to the type of

products Star Software makes, the problem of junk mail falls on Star’s clients and not

on the company itself. While legislation may be introduced to curb the tide of adver-

tising delivered through the mail, the fact that more companies are diverting their pro-

motion dollars to specialty advertising indicates that most do not fear the potential for

increased legislation.

5. Technological forces. A major technological trend involves the growing popularity of tab- let computers. Tablet computers, such as the Apple iPad and Samsung Galaxy Tab, provide

consumers with increased mobility and application services. Tablet computers have begun

taking market share away from desktop, laptop, and netbook computers. As this trend

continues, current software-based calendar products will have to be adapted to match the

new technology.

6. Sociocultural forces. In today’s society, consumers have less time for work or leisure. The hallmarks of today’s successful products are convenience and ease of use. In short,

if the product does not save time and is not easy to use, consumers will simply ignore

it. Software-based calendars fit this consumer need quite well. A software-based calen-

dar also fits in with other societal trends: a move away from paper and hard copies, the

need to automate repetitive tasks, and the growing dependence on information technology,

for example.

B. Target Market(s) By focusing on a commitment to service and quality, Star Software has effectively imple-

mented a niche differentiation strategy in a somewhat diverse marketplace. Its ability to dif-

ferentiate its product has contributed to superior annual returns. Its target market consists

of manufacturers or manufacturing divisions of large corporations that move their products

through dealers, distributors, or brokers. Its most profitable product is a software program for

a PC-based calendar, which can be tailored to meet client needs by means of artwork, logos,

and text. Clients use this calendar software as a promotional tool, providing a disk to their

customers as an advertising premium. The calendar software is not produced for resale.

The calendar software began as an ancillary product to Star’s commercial printing

business. However, due to the proliferation of new computer technology, the computer

calendar soon became more profitable for Star than its wall and desktop paper calendars.

This led to the sale of the commercial printing plant and equipment to employees. Star

Software has maintained a long-term relationship with these former employees, who have

added capabilities to reproduce computer disks and whose company serves as Star’s pri-

mary supplier of finished goods. Star’s staff focuses on further development and marketing

of the software.

B-2 Online Appendix B | Sample Marketing Plan

The analysis of cur- rent target markets assesses demographic, geographic, psychographic, and product usage characteristics of the target markets. It also assesses the current needs of each of the firm’s target markets and antici- pated changes in those needs, and determines how well the organization’s current products are meeting those needs.

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C. Current Marketing Objectives and Performance

Star Software’s sales representatives call on potential clients and, using a template demon-

stration disk, help them create a calendar concept. Once the sale has been finalized, Star

completes the concept, including design, copywriting, and customization of the demon-

stration disk. Specifications are then sent to the supplier, located about 1 , 000 miles away,

where the disks are produced. Perhaps what most differentiates Star from its competitors

is its high level of service. Disks can be shipped to any location the buyer specifies. Since

product development and customization of this type can require significant amounts of

time and effort, particularly during the product’s first year, Star deliberately pursues a strat-

egy of steady, managed growth. Star Software markets its products on a company-specific

basis. It has an annual reorder rate of approximately 90 percent and an average customer-

reorder relationship of about eight years. The first year in dealing with a new customer

is the most stressful and time-consuming for Star’s salespeople and product developers.

Subsequent years are faster and significantly more profitable. A company must set mar-

keting objectives, measure performance against those objectives, and then take corrective

action if needed.

The company is currently debt free except for the mortgage on its facility. However, about

80 percent of its accounts receivable are billed during the last three months of the calendar

year. Seasonal account billings, along with the added travel of Star’s sales staff during the

peak season, pose a special challenge to the company. The need for cash to fund operations

in the meantime requires the company to borrow significant amounts of money to cover the

period until customer billing occurs. Star Software’s marketing objectives include increases

in both revenues and profits of approximately 10 percent over the previous year. Revenues

should exceed $ 4 million, and profits are expected to reach $ 1.3 million.

III. SWOT ANALYSIS

A. Strengths 1. Star Software’s product differentiation strategy is the result of a strong market orientation,

commitment to high quality, and customization of products and support services.

2. There is little turnover among employees, who are well compensated and liked by custom-

ers. The relatively small staff size promotes camaraderie with coworkers and clients, and

fosters communication and quick response to clients’ needs.

3. A long-term relationship with the primary supplier has resulted in shared knowledge of the

product’s requirements, adherence to quality standards, and a common vision throughout

the development and production process.

4. The high percentage of reorder business suggests a satisfied customer base, as well as

positive word-of-mouth communication, which generates some 30 percent of new busi-

ness each year.

B. Weaknesses 1. The highly centralized management hierarchy (the McLemores) and the lack of manage-

rial backup may impede creativity and growth. Too few people hold too much knowledge.

2. Despite the successful long-term relationship with the supplier, single sourcing could

make Star Software vulnerable in the event of a natural disaster, strike, or dissolution of

the current supplier. Contingency plans for suppliers should be considered.

3. The seasonal nature of the product line creates bottlenecks in productivity and cash flow,

places excessive stress on personnel, and strains the facilities.

B-3Sample Marketing Plan | Online Appendix B

Weaknesses are limita- tions a firm has in developing or implementing a marketing strategy.

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Strengths are competi- tive advantages or core compe- tencies that give the organization an advantage in meeting the needs of its customers.

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4. Both the product line and the client base lack diversification. Dependence on current reor-

der rates could breed complacency, invite competition, or create a false sense of customer

satisfaction. The development of a product that would make the software calendar obso-

lete would probably put Star out of business.

5. While the small size of the staff fosters camaraderie, it also impedes growth and new-

business development.

6. Star Software is reactive rather than assertive in its marketing efforts because of its heavy

reliance on positive word-of-mouth communication for obtaining new business.

7. Star’s current facilities are crowded. There is little room for additional employees or new

equipment.

C. Opportunities 1. Advertising expenditures in the United States exceed $ 132 billion annually. More than

$ 25 billion of this is spent on direct-mail advertising and another $ 20 billion on specialty

advertising. Star Software’s potential for growth is significant in this market.

2. Technological advances have not only freed up time for Americans and brought greater

efficiency but have also increased the amount of stress in their fast-paced lives. Laptops,

tablet computers, and mobile technology have become commonplace, and personal infor-

mation managers have gained popularity.

3. As U.S. companies look for ways to develop customer relationships rather than just close

sales, reminders of this relationship could come in the form of acceptable premiums or

gifts that are useful to the customer.

4. Computer-based calendars are easily distributed nationally and globally. The globalization

of business creates an opportunity to establish new client relationships in foreign markets.

D. Threats 1. Reengineering, right-sizing, and outsourcing trends in management may alter tradi-

tional channel relationships with brokers, dealers, and distributors, or eliminate them

altogether.

2. Calendars are basically a generic product. The technology, knowledge, and equipment

required to produce such an item, even a computer-based one, are minimal. The possible

entry of new competitors is a significant threat.

3. Theft of trade secrets and software piracy through unauthorized copying are difficult to

control.

4. Specialty advertising through promotional items relies on gadgetry and ideas that are new

and different. As a result, product life cycles may be quite short.

5. Single-sourcing can be detrimental or even fatal to a company if the buyer–supplier rela-

tionship is damaged or if the supplying company has financial difficulty.

6. Competition from traditional paper calendars and other promotional items is strong.

E. Matching Strengths to Opportunities/ Converting Weaknesses and Threats

1. The acceptance of technological advances and the desire to control time create a potential

need for a computer-based calendar.

2. Star Software has more opportunity for business growth during its peak season than it can

presently handle because of resource (human and capital) constraints.

3. Star Software must modify its management hierarchy, empowering its employees through

a more decentralized marketing organization.

4. Star Software should discuss future growth strategies with its supplier and develop contin-

gency plans to deal with unforeseen events. Possible satellite facilities in other geographic

locations should be explored.

B-4 Online Appendix B | Sample Marketing Plan

Opportunities are favor- able conditions in the environ- ment that could yield rewards for an organization if acted on properly.

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Threats are conditions or barriers that may prevent the organization from reaching its objectives.

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During the development of a marketing plan, market- ers attempt to match internal strengths to external opportuni- ties. In addition, they try to convert internal weaknesses into strengths and external threats into opportunities.

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5. Star Software should consider diversifying its product line to satisfy new market niches

and develop nonseasonal products.

6. Star Software should consider surveying its current customers and its customers’ clients to

gain a better understanding of their changing needs and desires.

IV. MARKETING OBJECTIVES

Star Software Inc. is in the business of helping other companies market their products and/

or services. Besides formulating a market-oriented and customer-focused mission statement,

Star Software should establish an objective to achieve cumulative growth in net profit of at

least 50 percent over the next five years. At least half of this 50 percent growth should come

from new, nonmanufacturing customers and from products that are nonseasonal or that are

generally delivered in the off-peak period of the calendar cycle.

To accomplish its marketing objectives, Star Software should develop benchmarks to mea-

sure progress. Regular reviews of these objectives will provide feedback and possible correc-

tive actions on a timely basis. The major marketing objective is to gain a better understanding

of the needs and satisfaction of current customers. Because Star Software is benefiting from a

90 percent reorder rate, it must be satisfying its current customers. Star could use the knowl-

edge of its successes with current clients to market to new customers. To capitalize on its

success with current clients, the company should establish benchmarks to learn how it can

improve the products it now offers through knowledge of clients’ needs and specific opportu-

nities for new-product offerings. These benchmarks should be determined through marketing

research and Star’s marketing information system.

Another objective should be to analyze the billing cycle Star now uses to determine if there

are ways to bill accounts receivable in a more evenly distributed manner throughout the year.

Alternatively, repeat customers might be willing to place orders at off-peak cycles in return for

discounts or added customer services.

Star Software should also create new products that can use its current equipment, technol-

ogy, and knowledge base. It should conduct simple research and analyses of similar products

or product lines with an eye toward developing specialty advertising products that are software

based but not necessarily calendar related.

V. MARKETING STRATEGIES

A. Target Market(s) Target Market 1: Large manufacturers or stand-alone manufacturing divisions of large cor- porations with extensive broker, dealer, or distributor networks

Example: An agricultural chemical producer, like Dow Chemical, distributes its products to numerous rural “feed and seed” dealers. Customizing calendars with Chicago Board of Trade futures or USDA agricultural report dates would be beneficial to these potential clients.

Target Market 2: Nonmanufacturing, nonindustrial segments of the business-to-business market with extensive customer networks, such as banks, medical services, or financial

planners

Example: Various sporting goods manufacturers distribute to specialty shop dealers. Calendars could be customized to the particular sport, such as golf (with PGA, Virginia Slims, or other tour dates), running (with various national marathon dates), or bowling (with national tour dates).

B-5Sample Marketing Plan | Online Appendix B

The development of marketing objectives is based on environmental analysis, SWOT analysis, the firm’s overall corporate objectives, and the organization’s resources. For each objective, this section should answer the question, “What is the specific and mea- surable outcome and time frame for completing this objective?”

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The marketing plan clearly specifies and describes the target market(s) toward which the organization will aim its marketing efforts. The difference between this section and the earlier section covering target markets is that the earlier sec- tion deals with present target markets, whereas this section looks at future target markets.

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Target Market 3: Direct consumer markets for brands with successful licensing arrange- ments for consumer products, like Coca-Cola

Example: Products with major brand recognition and fan club membership, such as Harley-Davidson motorcycles or the Bloomington Gold Corvette Association, could pro- vide additional markets for customized computer calendars. Environmental or political groups represent a nonprofit market. Brands with licensing agreements for consumer products could provide a market for consumer computer calendars in addition to the spe- cialty advertising product, which would be marketed to manufacturers/dealers.

Target Market 4: Industry associations that regularly hold or sponsor trade shows, meetings, conferences, or conventions

Example: National associations, such as the National Dairy Association or the American Marketing Association, frequently host meetings or annual conventions. Customized cal- endars could be developed for any of these groups.

B. Marketing Mix 1. Products. Star Software markets not only calendar software but also the service of spe-

cialty advertising to its clients. Star’s intangible attributes are its ability to meet or exceed

customer expectations consistently, its speed in responding to customers’ demands, and

its anticipation of new-customer needs. Intangible attributes are difficult for competitors

to copy, thereby giving Star Software a competitive advantage.

2. Price. Star Software provides a high-quality specialty advertising product customized to its clients’ needs. The value of this product and service is reflected in its premium price.

Star should be sensitive to the price elasticity of its product and overall consumer demand.

3. Distribution. Star Software uses direct marketing. Since its product is compact, light- weight, and nonperishable, it can be shipped from a central location direct to the client via

UPS, FedEx, or the U.S. Postal Service. The fact that Star can ship to multiple locations

for each customer is an asset in selling its products.

4. Promotion. Because 90 percent of Star’s customers reorder each year, the bulk of promo- tional expenditures should focus on new-product offerings through direct-mail advertising

and trade journals or specialty publications. Any remaining promotional dollars could be

directed to personal selling (in the form of sales performance bonuses) of current and new

products.

VI. MARKETING IMPLEMENTATION

A. Marketing Organization Because Star’s current and future products require extensive customization to match clients’

needs, it is necessary to organize the marketing function by customer groups. This will allow

Star to focus its marketing efforts exclusively on the needs and specifications of each tar-

get customer segment. Star’s marketing efforts will be organized around the following cus-

tomer groups: (1) manufacturing group; (2) nonmanufacturing, business-to-business group;

(3)  consumer product licensing group; and (4) industry associations group. Each group will

be headed by a sales manager who will report to the marketing director (these positions must

be created). Each group will be responsible for marketing Star’s products within that customer

segment. In addition, each group will have full decision-making authority. This represents a

shift from the current, highly centralized management hierarchy. Frontline salespeople will be

empowered to make decisions that will better satisfy Star’s clients.

These changes in marketing organization will enable Star Software to be more creative

and flexible in meeting customers’ needs. Likewise, these changes will overcome the current

B-6 Online Appendix B | Sample Marketing Plan

Though the marketing mix section in this plan is abbrevi- ated, this component should provide considerable details regarding each element of the marketing mix: product, price, distribution, and promotion.

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This section of the market- ing plan details how the firm will be organized—by functions, products, regions, or types of customers—to implement its marketing strategies. It also indicates where decision-making authority will rest within the marketing unit.

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lack of diversification in Star’s product lines and client base. Finally, this new marketing orga-

nization will give Star a better opportunity to monitor the activities of competitors.

B. Activities, Responsibilities, and Timetables for Completion

All implementation activities are to begin at the start of the next fiscal year on April 1. Unless

specified, all activities are the responsibility of Star Software’s next president, Jonathan

McLemore.

• On April 1, create four sales manager positions and the position of marketing director.

The marketing director will serve as project leader of a new business analysis team, to be

composed of nine employees from a variety of positions within the company.

• By April 15, assign three members of the analysis team to each of the following projects:

(1) research potential new-product offerings and clients, (2) analyze the current billing

cycle and billing practices, and (3) design a customer survey project. The marketing direc-

tor is responsible.

• By June 30, the three project groups will report the results of their analyses. The full busi-

ness analysis team will review all recommendations.

• By July 31, develop a marketing information system to monitor client reorder patterns and

customer satisfaction.

• By July 31, implement any changes in billing practices as recommended by the business

analysis team.

• By July 31, make initial contact with new potential clients for the current product line.

Each sales manager is responsible.

• By August 31, develop a plan for one new-product offering, along with an analysis of its

potential customers. The business analysis team is responsible.

• By August 31, finalize a customer satisfaction survey for current clients. In addition, the

company will contact those customers who did not reorder this year’s product line to dis-

cuss their concerns. The marketing director is responsible.

• By December, implement the customer satisfaction survey with a random sample of 20 percent

of current clients who reordered this year’s product line. The marketing director is responsible.

• By February, implement a new-product offering, advertising to current customers and to a

sample of potential clients. The business analysis team is responsible.

• By March, analyze and report the results of all customer satisfaction surveys and evaluate

the new-product offering. The marketing director is responsible.

• Reestablish the objectives of the business analysis team for the next fiscal year. The mar-

keting director is responsible.

VII. PERFORMANCE EVALUATION

A. Performance Standards and Financial Controls

A comparison of the financial expenditures with the plan goals will be included in the project

report. The following performance standards and financial controls are suggested:

• The total budget for the billing analysis, new-product research, and the customer survey

will be equal to 60 percent of the annual promotional budget for the coming year.

• The breakdown of the budget within the project will be a 20 percent allocation to the bill-

ing cycle study, a 30 percent allocation to the customer survey and marketing information

system development, and a 50 percent allocation to new-business development and new-

product implementation.

B-7Sample Marketing Plan | Online Appendix B

This component of the marketing plan outlines the specific activities required to implement a marketing strategy, determines who is responsible for performing these activities, and outlines when these activi- ties should be accomplished, based on a specified schedule.

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This section details how the performance of the market- ing strategy will be evaluated. Performance standards will be established against which to compare actual performance.

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• Each project team is responsible for reporting all financial expenditures, including person-

nel salaries and direct expenses, for its segment of the project. A standardized reporting

form will be developed and provided by the marketing director.

• The marketing director is responsible for adherence to the project budget and will report

overages to the company president on a weekly basis. The marketing director is also

responsible for any redirection of budget dollars as required for each project of the busi-

ness analysis team.

• Any new-product offering will be evaluated on a quarterly basis to determine its profitabil-

ity. Product development expenses will be distributed over a two-year period, by calendar

quarters, and will be compared with gross income generated during the same period.

B. Measuring Actual Performance To analyze the effectiveness of Star Software’s marketing strategy, it is necessary to compare

its actual performance with plan objectives. To facilitate this analysis, monitoring procedures

should be developed for the various activities required to bring the marketing strategy to frui-

tion. These procedures include, but are not limited to, the following:

• A project management concept will be used to evaluate the implementation of the market-

ing strategy by establishing time requirements, human resource needs, and financial or

budgetary expenditures.

• A perpetual comparison of actual and planned activities will be conducted on a monthly

basis for the first year and on a quarterly basis after the initial implementation phase. The

business analysis team, including the marketing director, will report its comparison of

actual and planned outcomes directly to the company president.

• Each project team is responsible for determining what changes must be made in proce-

dures, product focus, or operations as a result of the studies conducted in its area.

B-8 Online Appendix B | Sample Marketing Plan