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Creating a Marketing Plan:

An Overview

E x c e r p t e d f r o m

Marketer’s Toolkit:

The 10 Strategies You Need to Succeed

Harvard Business School Press Boston, Massachusetts

ISBN-10: 1-4221-0256-4 ISBN-13: 978-1-4221-0256-5 2564BC

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Copyright 2006 Harvard Business School Publishing Corporation All rights reserved

Printed in the United States of America

This chapter was originally published as chapter 2 of Marketer’s Toolkit, copyright 2006 Harvard Business School Publishing Corporation.

No part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form, or by any means (electronic, mechanical, photocopying, recording, or otherwise), without the prior permission of the publisher. Requests for

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Creating a Marketing Plan

Key Topics Covered in This Chapter

• The purpose of a marketing plan

• Planning the elements of the marketing mix

• Controlling the plan

An Overview

2

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“P l a n y o u r w o r k , and work your plan.”That timeless piece of business philosophy canhelp you succeed in any number of workplace activities—including marketing. This chapter explains the market- ing plan and its many elements.

From Strategy to Plan

A marketing plan lays out a campaign that aims to fulfill a company’s market strategy. At the business unit or product level, the plan aims to transform a product or service concept into a successful offering that meets the needs of target customers and fulfills the company’s expectations for sales, market share, and so forth. The plan states ex- actly what the company will do in launching new products and sup- porting older ones. It indicates the timing of sales and promotional activities, pricing intentions, and distribution efforts. How the plan will be controlled and the results measured are also part of the plan. Plans are contained in binders and are treated with confidentiality lest competitors use their details to deploy counterefforts.

Most plans include the following (for the company or for a product line):

• An executive summary.

• A table of contents.

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• A summary of the current situation. This contains all relevant data, including SWOT analysis (analysis of strengths, weak- nesses, opportunities, and competitive threats).

• A focused assessment of the market opportunity. This includes a statement of target market segments, a customer and needs assessment, and the competitive challenges faced by the com- pany and its products (or particular product line).

• Financial and marketing goals. Financial goals are usually ex- pressed as incremental revenue improvements, and expected profits at the end of the planning period. Marketing goals are expressed as unit sales or market share.

• A summary of the company’s marketing strategy. This sum- mary identifies the target market and indicates how the product or product line will be positioned, distributed, and priced. It also enumerates the specific actions that will be taken to achieve the stated goals. Those actions may include reorganiza- tion of the sales force, the use of customer rebates, a national ad campaign, direct mail programs, and so forth.

• A month-to-month marketing budget.

• Forecast month-to-month unit sales and revenues.

• A plan for monitoring and evaluating action plans in progress and at the end of the plan period.

Note that the appendix contains a helpful marketing plan template that you can use to develop a plan that fits your company’s unique re- quirements. Check it out.

Implementing Your Plan via the Marketing Mix

The marketing plan begins with customer targeting, something we’ll deal with in detail later. After the target customer segments have been identified, the plan addresses them through the marketing

Creating a Marketing Plan 3

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mix. The marketing mix—also called the four P’s of marketing— includes product, place, price, and promotion (see figure 2-1). These represent the tools you will use to pursue your objectives in the tar- get market.

(Note: Identifying the target market is an essential part of any marketing plan. So, too, is position. We discuss these important top- ics in chapter 4.)

Product

The product (or service) is the centerpiece of the marketing mix. Whether it’s a life insurance policy, a washing machine, or a broad- band Internet service, the product is the company’s offer to cus- tomers. That offer includes physical aspects as well as the less tangible elements, such as warranties, option choices, and after-sales service. Thus, the product is the entire package you offer to customers.

Marketer’s Toolkit

Price

Product

Promotion

Place Target market

F I G U R E 2 - 1

Applying the marketing mix to a target market

4

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You can differentiate products physically or through the services your company provides in support of the product. Products’ physi- cal distinctions include the following:

• Form—size, shape, physical structure; for example, aspirin coating and dosage

• Features—for example, a word processing program’s new text- editing tool

• Performance quality—the level at which the product’s primary characteristics function

• Conformance quality—the degree to which all the units of the product perform equally

• Durability—the product’s expected operating life under natural or stressful conditions

• Reliability—the probability that the product won’t malfunction or fail

• Repairability—the ease with which the product can be fixed if it malfunctions

• Style—the product’s look and feel

• Design—the way all the foregoing qualities work together (it’s easy to use, looks nice, and lasts a long time)

You can also differentiate your product by service distinctions that set it apart. Service distinctions include the following:

• Ordering ease—how easy it is for customers to buy the product

• Delivery—how quickly and accurately the product is delivered

• Installation—how well the work is done to make the product usable in its intended location

• Customer training—whether your company offers to train cus- tomers in using the product

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• Customer consulting—whether your company offers advice or research services to buyers

• Maintenance and repair—how well your company helps cus- tomers keep the product in good working order

The actual design of the product or service should be guided by a deep understanding of what customers need, want, and are willing to pay for, as determined by market understanding and research.

Place

Place refers to the point of sale and the distribution of the product or service. Place may be a retail store, a national distributor network, an e-commerce Web site, or a direct mail catalog. Offering the product where and when customers want it is one of the most critical aspects of any marketing plan.

Witness the success of Amazon.com and Dell. Amazon.com made books and other items handily available to customers 24/7, and in a place that many found convenient—an Internet Web site. At a time when the book-buying public had to make time-consuming trips to a bricks-and-mortar bookstore and browse through thousands of on-shelf products, Amazon.com offered a less time-consuming al- ternative and far greater product selection. True, Amazon.com cus- tomers missed out on the pleasures of traditional bookstore browsing and had only limited opportunities to thumb through prospective pur- chases. But Amazon.com’s “place” gave them something bookstores didn’t provide: customer reviews and ratings.

Dell’s is another story of “place” success. Its strategic decision to sell directly to customers gave it a leg up on competitors in the battle for personal computer sales. While rivals followed the traditional ap- proach of distributing through retail stores and dealers, Dell skipped the middleman. Selling direct allowed Dell to do the following:

• Capture customer information that would otherwise be missed through other forms of distribution

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• Practice made-to-order manufacturing, another differentiating factor in a product class where competing products are very similar

• Make its product available 24/7

Few companies use a single place for transacting business with customers. Many have market channels through which they meet cus- tomers; the more numerous and effective these channels are, the greater the opportunities to make sales. The publisher of this book, for example, will take advantage of several channels, as shown in fig- ure 2-2. It will use a sales force to obtain shelf space in retail book- stores and will sell through Amazon.com. The sales force will also sell some copies to book wholesalers, which in turn will supply in- dependent bookstores. Specialized employees of the publisher will pursue direct bulk sales with corporations and with book clubs. Meanwhile, a foreign rights specialist in the publisher’s marketing department will attempt to sell translation rights for the book to non-English-language publishers around the world. The publisher will also use its e-commerce Web site to sell directly to final cus- tomers, avoiding the middlemen and the discounts they extract.

Creating a Marketing Plan

Publisher Sales force

E-commerce Web site

Amazon.com

Book chains

Independent bookstores

Wholesalers

Foreign publishers, book clubs, and corporate sales

Individual customers

F I G U R E 2 - 2

Many paths to the customer

7

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There are many paths to customers. A market-driven company takes as many of them as it can reasonably handle without causing conflicts between channels.

What aspects of “place” does your company use in its marketing plans? Are these the most optimal for satisfying customers and pro- ducing the sales and profits you seek, or are you simply following an old, unexamined blueprint for putting your product or service in front of customers? Think about it. Place is often taken for granted, but it makes a huge impact on marketing performance.

Price

Price is what a buyer must give up in exchange for your product or service. Pricing in a competitive environment is both critical and challenging. If you set the price too low, you’ll increase unit sales at the expense of profits. If you set it too high, some of your customers will walk into the waiting arms of competitors. Price decisions in- clude price point, list price, discounts, payment period, and so on.

In free and competitive markets, pricing is the linchpin of most transactions. When a customer who wants a product perceives that its value is worth the asking price, a transaction will take place, bar- ring other choices. Thus, moving the price higher or lower regulates the quantity of units sold. This point has implications for the prod- uct life cycle. You can price much more aggressively when your product is perceived as new, unique, and without strong substitutes, but you must often reduce your price as substitutes and competitors appear in the maturity stage of the cycle.

Generally, your flexibility in pricing is a function of the unique- ness of your product or service (see figure 2-3). This is because cus- tomers have difficulty in assessing the value of more unique offerings, such as a custom-built guitar or a fully restored 1962 MG sports car. There are few if any comparables, making valuation difficult. The exact opposite is true among commodity products, such as heating oil and electrical wiring. In these cases, sellers have little flexibility. If they price their offering higher than the going rate, sales will plum- met. If they drop the price, sales will temporarily increase but will

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level off as competitors drop their prices—confounding the prof- itability of all sellers.

Some sellers successfully maintain a high price by surrounding their very ordinary products with an aura of uniqueness, quality, or exoticism. This approach is commonplace in, for example, the cos- metics industry.

Wherever you price your product or service, that price is an im- portant element of the marketing mix and will have an impact on your results. You can price for any of the following objectives: to in- crease unit sales, profits, or market share; to undermine a competi- tor; or to keep competitors from entering your turf. Successful companies design their new products with specific price targets in mind. (Note: For more details on pricing, refer to chapter 9).

Promotion

Promotion, the fourth element in the marketing mix, is the most dif- ficult one to describe. It is all the communicative activities you use to ensure that customers know about your offerings, have a favorable

Creating a Marketing Plan

Uniqueness

F le

xi b

ili ty

Custom-built home

Tract housing

Low High

Low

High

F I G U R E 2 - 3

Pricing flexibility and product uniqueness

9

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impression of them, and actually make a transaction. These activities include advertising, catalogs, contests, public relations, and personal selling. Within these categories we have TV, radio, and print ads, billboards, product placements in movies, sponsorship of public TV and radio channels, two-for-one dinner specials, customer loyalty programs, telemarketing, direct mail sales, and door-to-door solici- tations. And on and on.

The many faces of promotion are too numerous to cover in a book of this size. Suffice it to say that, along with market research, promotion provides the critical communication link between your company and the customers you aim to serve.

Controlling Plan Implementation

Even when you’re prepared with a cohesive plan, adequate re- sources, and all the right skills, you are bound to encounter surprises during implementation of your marketing plan. That’s because busi- ness, like life, rarely plays out according to plan. Here are a few ex- amples of the many surprises your firm may experience:

• Customer demand is lower than what your market research led you to believe.

• Consumers use your product in ways you never intended.

• A previously invisible competitor blindsides you with a daz- zling new offering.

• The cost of an ad campaign is higher than you estimated.

Constant monitoring and control of the firm’s marketing activ- ities can help your company respond effectively to these kinds of un- expected events. Table 2-1 shows four types of marketing controls and explains who’s responsible, why you might select a particular form of control, and how you might implement these control mea- sures. Note that many items in the “How to control” column are quantitative metrics: expense-to-sales ratio, product territory prof- itability, and so forth. Metrics are like the gauges on an aircraft con-

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trol panel, indicating where you are and showing key parameters of operating performance.

Depending on your role, you may find yourself responsible for one or more of these activities. Or others in your company may need your help in gathering the required information to conduct these assessments. Whichever part of the control process you’re in- volved in, you can feel proud about contributing to a key stage in your firm’s marketing campaign.

Summing Up

• A marketing plan states exactly what the company will do in launching new products and supporting older ones. It indi- cates the timing of its sales and promotional activities, pricing

Creating a Marketing Plan

TA B L E 2 - 1

Controlling your marketing plan

Who is Why this Type of control responsible? control type? How to control

Annual plan Top and middle To assess whether Analyze sales, market managers planned results have share, marketing

been achieved expense-to-sales ratio

Profitability Marketing To see where the Measure profitability controllers company is making by product, territory,

and losing money customer, segment, channel, order size; measure ROI

Efficiency Line and staff To improve the Measure efficiency of managers; spending and impact sales force, advertise- marketing of marketing ments, sales promo- controllers dollars tions, distribution

Strategy Top managers, To ask whether the Review marketing marketing company is pursuing effectiveness and auditors the best market, company’s social and

product, and channel ethical responsibilities opportunities

Source: Harvard ManageMentor® on Marketing Essentials, adapted with permission.

11

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intentions, and distribution efforts. How the plan will be con- trolled and the results measured are also part of the plan.

• A marketing plan is based on customer targeting and the ele- ments of the marketing mix: product (or service), place, price, and promotion (the four P’s).

• Product is the company’s offer to customers. It includes the physical aspects of the offer as well as intangible elements, such as warranties.

• Place refers to the point of sale and the distribution of the product or service. Place may be a retail store, a national dis- tributor network, an e-commerce Web site, a direct mail cata- log, or something else.

• Price is what a buyer must give up in exchange for the seller’s product. In free and competitive markets it is a regulator of customer demand. Generally, sellers have greater flexibility in pricing when their offer is unique; they have less flexibility as their offers become commodity-like.

• Promotion describes the many communicative activities used to ensure that customers know about the company’s offerings, have a favorable impression of them, and actually make a transaction.

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Notes

Chapter 2

1. Carl von Clausewitz, On War, volume 1 (London: Kegan Paul, 1911), 177.

2. Edward Mead Earle, ed., Makers of Modern Strategy (Prince- ton, NJ: Princeton University Press, 1943).

3. Michael E. Porter, Competitive Strategy (New York: Free Press, 1985), xxiv.

4. Michael E. Porter, “What Is Strategy?” Harvard Business Re- view, November–December 1996, 61–78.

13

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