Marketing Planning

Introduction

Marketing is a process of developing and implementing plans to identify and satisfy customer
needs and wants with the objective of customer satisfaction and profits making. The main
elements of marketing planning are - market research to identify and anticipate customer needs
and wants; and planning of appropriate marketing mix to meet market requirements/demands.

Definition of Marketing Planning

"Marketing Planning is the process of developing marketing plan incorporating overall marketing
objectives, strategies, and programs of actions designed to achieve these objectives."

Marketing Planning involves setting objectives and targets, and communicating these targets to
people responsible to achieve them. It also involves careful examination of all strategic issues,
including the business environment, the market itself, the corporate mission statement,
competitors, and organisational capabilities.

"Marketing Plan is a comprehensive blue print which outlines an organisation's overall

marketing efforts."

Marketing Plan is a written document that describes an organisation's advertising and marketing
efforts for a coming period of time. It includes description of target markets, marketing situation,
organisation position, competition, and description of marketing mix the organisation intend to
use to reach their marketing goals.

Marketing Planning Process

Marketing planning process is a series of stages that are usually followed in a sequence.
Organisations can adapt their marketing plan to suit the circumstances and their requirements.
Marketing planning process involves both the development of objectives and specifications for
how to achieve the objectives. Following are the steps involved in a marketing plan.

1) Mission

Mission is the reason for which an organisation exists. Mission statement is a straightforward
statement that shows why an organisation is in business, provides basic guidelines for further
planning, and establishes broad parameters for the future. Many of the useful mission
statements motivates staff and customers.
2) Corporate Objectives

Objectives are the set of goals to be achieved within a specified period of time. Corporate
objectives are most important goals the organization as a whole wishes to achieve within a
specified period of time, say one or five years. All the departments of an organisation including
marketing department works in harmony to achieve the corporate objectives of the organisation.
Marketing department must appreciate the corporate objectives and ensure its actions and
decisions support the overall objectives of the organisation. Mission statement and corporate
objectives are determined by the top level management (including Board of Directors) of the
organisation. The rest of the steps of marketing planning process are performed by marketing
department. All the actions and decisions of the marketing department must be directed to
achieve organisation mission and its corporate objectives.

3) Marketing Audit

Marketing audit helps in analysing and evaluating the marketing strategies, activities,
problems, goals, and results. Marketing audit is done to check all the aspects of business
directly related to marketing department. It is done not only at the beginning of the marketing
planning process but, also at a series of points during the implementation of plan. The
marketing audit clarifies opportunities and threats, so that required alterations can be done to
the plan if necessary.

4) SWOT Analysis

The information gathered through the marketing audit process is used in development of SWOT
Analysis. It is a look at organisation's marketing efforts, and its strengths, weaknesses,
opportunities, and threats related to marketing functions.

• Strengths and Weaknesses are factors inside the organisation that can be controlled by
the organisation. USP of a product can be the example of strength, whereas lack of
innovation can be the example of weakness.

• Opportunities and Threats are factors outside the organisation which are beyond the
direct control of an organisation. Festive season can be an example of opportunity to
make maximum sales, whereas increasing FDI in a nation can be the example of threat
to domestic players of that nation.
5) Marketing Assumptions

A good marketing plan is based on deep customer understanding and knowledge, but it is not
possible to know everything about the customer, so lot of different things are assumed about
customer.

For example :-

• Target Buyer Assumptions - assumptions about who the target buyers are.

• Messaging/Offering Assumptions - assumptions about what customers think are the

most important features of product to be offered.

6) Marketing Objectives and Strategies

After identification of opportunities and challenges, the next step is to develop marketing
objectives that indicate the end state to achieve. Marketing objective reflects what an
organisation can accomplish through marketing in the coming years.

Objective identify the end point to achieve. Marketing strategies are formed to achieve the
marketing objectives. Marketing strategies are formed to determine how to achieve those end
points. Strategies are broad statements of activities to be performed to achieve those end
points.

7) Forecast the Expected Results

Marketing managers have to forecast the expected results. They have to project the future
numbers, characteristics, and trends in the target market. Without proper forecasting, the
marketing plan could have unrealistic goals or fall short on what is promised to deliver.

• Forecasting Customer Response - Marketing managers have to forecast the response

that the average customers will have to marketing efforts. Without some idea how the
marketing will be received, managers can't accurately plan the promotions.

• Forecasting Marketing cost - To make the marketing plan stronger, accurate forecast of
marketing cost is required to be done.

• Forecasting the Market - To accurately forecast the market, marketing managers have to
gain an intimate understanding of customers, their buying behaviour, and tendencies.

• Forecasting the Competition - Forecast of competition like - what they market, how they
market, what incentives they use in their marketing can help to counter what they are
doing.
Marketing Competitiveness

Introduction

Whatever product a marketer has to offer in the market, one thing is sure, it's going to get
competition. It depends on the product type and marketplace what degree of competition it'll get.
For the success of any business it is necessary to compete effectively with other businesses.
The best way to mitigate competition is to develop marketing competitiveness. Marketing
Competitiveness is the ability of an marketing organization to deliver better value to customers
than competitors.

Meaning of Marketing Competitiveness

A universal and exact definition of marketing competitiveness does not exist. Competitiveness
means different things to different organizations. Some marketers view marketing
competitiveness as the ability to persuade customers to choose their offerings over alternatives;
while others view marketing competitiveness as the ability to deliver better values to customers
than competitors.

"Marketing Competitiveness is the ability of a business to improve continuously marketing

process capabilities and deliver better value to customers than competitors."

It is the ability of a business to add more values for its customers than competitors and attain a
position of relative advantage. It leads to a situation where a business has an advantage over its
competitors by being able to offer better value, quality, and service.

Customer values are the combination of several benefits offered for a given price, and
comprises all aspects of the physical product and the accompanying services.

Ways to Improve Marketing Competitiveness

• Customer values - Customer values should be viewed not only in terms of product
characteristics, but also in terms of processes which deliver the product. Both the
product and process concept have to be right to achieve customer satisfaction.

• Identify and Promote USP - Unique Selling Proposition is something that sets a product
apart from its competitors in the eyes of existing customers as well as new customers.
Marketers are required to identify USP of their product and effectively communicate it
with the target audience.

• Cost efficient operations - Business is required to be organized and operated efficiently,

so that the cost of production and distribution be minimized.
 • Customer delight - Business organizations must provide proper customer services to
delight its customers.

The above points can lead a business to a situation where it has an competitive advantage over
its competitors by being able to offer better value, quality, and service.

What is customer value?

Customer value is the customer’s perception of the worth of your product or service. Worth can
mean several things: the benefit these products or services provide to your target market, or the
value for money they offer.

Why is customer value important?

Understanding the value you provide customers can help you to better attract potential
customers and better service existing ones.

If, for example, a customer only values you for your low prices, offering a higher-priced product
might make them leave for a competitor. If your brand is perceived to provide excellent quality
products, offering items that appear of a lower quality might lead to customer churn.

Figuring out why customers are coming to your brand, in particular, helps you to better tailor
your products and services to new audiences. It can also help build stronger trust, and get
existing customers purchasing more. Meeting expectations and exceeding them in terms of
experience, quality, service, and more is easier when you know what standard you’re being held
to and exactly what your customers expect.

Not only that, but once you understand what’s affecting your customer value, you can start
to actively shape perception and ensure you consistently meet customer expectations. First,
however, you need to measure it.

How to measure customer value

Customer value can encompass many factors: your brand’s reliability, the effort level they need
to put in to get what they want, how innovative your products are, how useful your services are,
how they feel about your public image, and how successful their interactions with you are.

Measuring all these factors can seem daunting, but at the end of the day, customer value can
be best measured by answering the following questions:

• What are the customer benefits?

• What are the customer costs?

Measuring customer benefits

Customer benefits can include:

• The quality of your product or service

• Your public image and company values

• Your ability to provide a better offering than competitors

• The customer experience you provide

• The quality of your customer service

• The value you impart on them when they choose to buy with you

Some of these are easier to measure than others. For example, you can survey customers with
simple binary or multiple choice questions to get feedback on customer experience and product
quality – but understanding the social benefit of choosing you over another brand is harder to
quantify.

Continually reviewing customer feedback and collating data will help you to determine what
benefits attract customers. Using scoring metrics and feedback from the customer can help to
pinpoint what benefits matter most, so you can act accordingly.

Measuring customer costs

Customer costs can be divided into two types: the tangible operational data that can be proven)
and the intangible (how your customer feels about your product and how much they invest in
your brand).

Tangible costs might include:

• The financial cost of your product or service

• Upfront costs, such as installation or onboarding fees

• Maintenance costs

• Renewal or repurchasing costs

• Access costs for your product or service

The costs that are hard to quantify are:

• Bad customer experience

 • The time it takes to make a purchase

• The emotional cost of engaging with your brand and making a purchase

• The social cost of choosing you over competitors

• The time cost of undergoing the learning curve for your products or services

The costs that are easier to quantify can easily be gauged through your operational data. For
the intangible costs, gather real-time feedback from customers so you get data that’s honest
and relevant. Customer surveys and other feedback channels will help you to measure these
more difficult metrics.

Customer value formulas

Once you’ve calculated the monetary and personal benefits and costs of engaging with your
brand, you can then calculate your customer value.

Customer value can be calculated using a simple formula:

Total Customer Benefits — Total Customer Costs = Customer Value

The benefits for the customer must outweigh the costs to result in a higher customer value.

The calculation for customers choosing your product or service can also be captured in a
formula:

(Value¹ — Price¹) > (Value² — Price²)

Value¹ is the value of your product or service in your customer’s eyes. Price¹ is the cost of that
product or service. Value² and Price² are the same for the next best alternative from your
competitor.

This formula simply means that the value of your product (minus the price it costs) must be
more than that of the best alternative. Your customers must see your value as being worth the
cost, and that your offering is worth more than the next best thing.

Obviously, these formulas won’t provide you with a neat financial sum in the end. However,
calculating whether your customers think the benefits are worth the cost of buying your offering
– and understanding the factors that go into that decision – will help you to maintain and
improve your customer value.

How to increase customer value

Increasing your customer value requires some introspection about your customers and
their experience with your brand.
Make customer experience a top priority

Your customers’ experience with your brand may be the most important factor in how much they
value your products and services. Does their experience with your brand reflect what they
believe about you? Are you meeting their expectations for a smooth service with quality
products?

Your customer value is shaped by the experiences they have with your brand. If you want your
customers to see your brand as reliable, high quality, and value for money, then your customer
experience needs to reflect these traits. Great customer experience leads to great customer
value and vice versa

Understand why customers choose you

Understanding your customers’ motivations in coming to your brand can help you pinpoint how
they value your offering. Collecting qualitative and quantitative customer data – such as survey
responses, repeat purchase rates, and more – can help you to see what’s attracted customers
to your brand, and repeat the winning formula.

It can also give you a better gauge of whether price is a vital factor for customer choice, or
whether quality and experience are more highly rated. By letting customers’ needs and wishes
guide you in what you offer, you can create a more positive customer value.

Not only that, but you can segment your customers to better provide the value that they expect.
Not all customers will be drawn to you for the same reasons – so make sure you’re providing
each customer segment with the value they’re looking for.

Think about more than just the cost

Though the cost of your products and services might be a big factor in why someone chooses
you over your competitors, it’s not the only reason. Finding out from your customer what makes
you competitive aside from price can help you to focus more on what your customers value.

Remove obstacles

When being judged on your value, you don’t want customers to get stuck thinking about issues
that don’t reflect your product or service quality. If your payment system is slow or difficult to
use, customers are likely to focus on that, instead of your great offering. Make sure that
customers judge you on the quality of your product or service– not how difficult it was to achieve
what they set out to do.
Don’t forget your loyal customers

Customers that are loyal are likely to place a high value on your brand. However, customer
needs can change dramatically over time, meaning you need to continually work to maintain the
high value you’ve been given by a loyal customer base.

Reward your loyal customers with more of what they like, and keep up to date on their
motivations for choosing you. You’ll be able to figure out why they value you over the long term
and ensure they’ll keep on sticking around.

Leveraging their insights to draw new customers means your perceived value can spread from
authentic sources that new customers are likely to trust.

Managing Price changes

When driving these days, do you look at the prices every time you pass a gas station? Do you
notice yourself paying more attention to the prices of everything you buy? You are not alone.
Consumers everywhere are more price aware. People who've been indifferent to price
increases for years are suddenly amazed at what things now cost. How can marketers cope not
just with inflation but with consumer sticker shock?

1. Understand Your Customers. There are at least four ways in which customers can respond
to higher gas prices: downgrade from premium to regular; take fewer trips by car, consolidate
errands, switch to public transportation; take the same number of trips but reduce the miles
driven per trip by, for example, vacationing closer to home; drive more economically and less
aggressively to improve miles per gallon; and buy a specific dollar amount of gas rather than
filling up every time, even though this may mean more visits to the pump. Some consumers may
even trade in (at a loss) the SUV for a hybrid, an example of how price inflation on one product
can cause demand shifts in a second, related, category.

2. Invest in Market Research. You must discard your existing customer segmentation
assumptions and segment consumers around product usage behavior and price sensitivity. You
must get out into the marketplace yourself and talk to consumers directly to understand their
pain points and how they are changing attitudes and behaviors in response to price inflation.
You must then quantify these shifts and develop product and pricing strategies that balance the
need to maintain both profitability and market share.

3. Redefine Value. Customers buying soft drinks can think about price in three ways: the
absolute cost per can or bottle, the cost per ounce, and, less common in this category, the
monthly consumption cost. Customers short on cash will focus much more on the absolute
price. They'll go for the 99 cent soft drink rather than the $1.29 container with 50 percent more
volume. To motivate cash-poor consumers, marketers must reverse engineer products and
packaging to hit key retail price points. This may mean downsizing package sizes, something
the candy industry always does in response to inflation.

4. Use Promotions. If you've always passed through raw material price increases to the end
consumer, you don't necessarily need to change that policy. However, lagging competitors in
passing on price increases can have the same effect as a temporary price promotion. More
customers than usual will be looking out for price promotions, but don't give away the store to
those who don't need the discount, and cut prices not across the board but only on items
selected as your inflation-busters. For cash poor consumers, these promotions should hit the
key price points on small pack sizes. For cash rich consumers, encourage multi-unit purchases
ahead of the inevitable next price increase.

5. Unbundle. Customers who previously welcomed the convenience of buying product, options,
and services rolled into one may now ask for a detailed price breakdown. Make it easy for your
more price-sensitive customers to better cherry-pick the options and services that they truly
need by giving them an unbundled menu of options.

6. Monitor Trade Terms. Beware of powerful distributors paying you more slowly than they turn
the inventory they buy from you. In an inflationary environment, they're making money on the
float by stretching their payables. Manage your inventory on a last-in, first-out basis to insure
that increases in your realized selling prices do not trail the increases in your input costs.

7. Increase Relevance. You need to persuade customers to cut back their expenditures on
other products, not on yours. In tough times, consumers more than ever need and deserve the
occasional treat. So, if you are Haagen Dazs, tell the consumer to substitute private label peas
for the name brand but to not forego the comfort of curling up on the sofa with a tub of her
favorite ice cream. Strong brands can hold consumer loyalty while increasing retail price points.
Weaker brands risk private label and generic substitution.

Clearly, not all marketers are equally affected by price inflation. Commodities like gasoline,
where the manufacturer adds little value before the product reaches the end consumer, are
more vulnerable, while sales of the most exclusive global luxury brands hold up pretty well
regardless of price. Especially challenged are marketers of goods and services for which
consumers don't necessarily understand the input costs: decorative candles, for example, are
highly sensitive to oil prices and the purchases are discretionary. The key here is to educate the
consumer, apologize for the uncontrollable price increases, give price-sensitive consumers
some promotional options, and reemphasize product benefits.

Price Policies

Managers should start setting prices during the development stage as part of strategic pricing to
avoid launching products or services that cannot sustain profitable prices in the market. This
approach to pricing enables companies to either fit costs to prices or scrap products or services
that cannot be generated cost-effectively. Through systematic pricing policies and strategies,
companies can reap greater profits and increase or defend their market shares. Setting prices is
one of the principal tasks of marketing and finance managers in that the price of a product or
service often plays a significant role in that product's or service's success, not to mention in a
company's profitability.

Generally, pricing policy refers to how a company sets the prices of its products and services
based on costs, value, demand, and competition. Pricing strategy, on the other hand, refers to
how a company uses pricing to achieve its strategic goals, such as offering lower prices to
increase sales volume or higher prices to decrease backlog. Despite some degree of difference,
pricing policy and strategy tend to overlap, and the different policies and strategies are not
necessarily mutually exclusive.

After establishing the bases for their prices, managers can begin developing pricing strategies
by determining company pricing goals, such as increasing short-term and long-term profits,
stabilizing prices, increasing cash flow, and warding off competition. Managers also must take
into account current market conditions when developing pricing strategies to ensure that the
prices they choose fit market conditions. In addition, effective pricing strategy involves
considering customers, costs, competition, and different market segments.

Pricing strategy entails more than reacting to market conditions, such as reducing pricing
because competitors have reduced their prices. Instead, it encompasses more thorough
planning and consideration of customers, competitors, and company goals. Furthermore, pricing
strategies tend to vary depending on whether a company is a new entrant into a market or an
established firm. New entrants sometimes offer products at low cost to attract market share,
while incumbents' reactions vary. Incumbents that fear the new entrant will challenge the
incumbents' customer base may match prices or go even lower than the new entrant to protect
its market share. If incumbents do not view the new entrant as a serious threat, incumbents may
simply resort to increased advertising aimed at enhancing customer loyalty, but have no change
in price in efforts to keep the new entrant from stealing away customers.

The following sections explain various ways companies develop pricing policy and strategy.
First, cost-based pricing is considered. This is followed by the second topic

of value-based pricing. Third, demand-based pricing is addressed followed by competition-

based pricing. After this, several strategies for new and established pricing strategies are
explained.

COST-BASED PRICING

The traditional pricing policy can be summarized by the formula:

Cost + Fixed profit percentage = Selling price

Cost-based pricing involves the determination of all fixed and variable costs associated with a
product or service. After the total costs attributable to the product or service have been
determined, managers add a desired profit margin to each unit such as a 5 or 10 percent
markup. The goal of the cost-oriented approach is to cover all costs incurred in producing or
delivering products or services and to achieve a targeted level of profit.

By itself, this method is simple and straightforward, requiring only that managers study financial
and accounting records to determine prices. This pricing approach does not involve examining
the market or considering the competition and other factors that might have an impact on
pricing. Cost-oriented pricing also is popular because it is an age-old practice that uses internal
information that managers can obtain easily. In addition, a company can defend its prices based
on costs, and demonstrate that its prices cover costs plus a markup for profit.

However, critics contend that the cost-oriented strategy fails to provide a company with an
effective pricing policy. One problem with the cost-plus strategy is that determining a unit's cost
before its price is difficult in many industries because unit costs may vary depending on volume.
As a result, many business analysts have criticized this method, arguing that it is no longer
appropriate for modern market conditions. Cost-based pricing generally leads to high prices in
weak markets and low prices in strong markets, thereby impeding profitability because these
prices are the exact opposites of what strategic prices would be if market conditions were taken
into consideration.

While managers must consider costs when developing a pricing policy and strategy, costs alone
should not determine prices. Many managers of industrial goods and service companies sell
their products and services at incremental cost, and make their substantial profits from their best
customers and from short-notice deliveries. When considering costs, managers should ask what
costs they can afford to pay, taking into account the prices the market allows, and still allow for
a profit on the sale. In addition, managers must consider production costs in order to determine
what goods to produce and in what amounts.

Nevertheless, pricing generally involves determining what prices customers can afford before
determining what amount of products to produce. By bearing in mind the prices they can charge
and the costs they can afford to pay, managers can determine whether their costs enable them
to compete in the low-cost market, where customers are concerned primarily with price, or
whether they must compete in the premium-price market, in which customers are primarily
concerned with quality and features.

VALUE-BASED PRICING

Value prices adhere to the thinking that the optimal selling price is a reflection of a product or
service's perceived value by customers, not just the company's costs to produce or provide a
product or service. The value of a product or service is derived from customer needs,
preferences, expectations, and financial resources as well as from competitors' offerings.
Consequently, this approach calls for managers to query customers and research the market to
determine how much they value a product or service. In addition, managers must compare their
products or services with those of their competitors to identify their value advantages and
disadvantages.

Yet, value-based pricing is not just creating customer satisfaction or making sales; customer
satisfaction may be achieved through discounting alone, a pricing strategy that could also lead
to greater sales. However, discounting may not necessarily lead to profitability. Value pricing
involves setting prices to increase profitability by tapping into more of a product or service's
value attributes. This approach to pricing also depends heavily on strong advertising, especially
for new products or services, in order to communicate the value of products or services to
customers and to motivate customers to pay more if necessary for the value provided by these
products or services.

DEMAND-BASED PRICING

Managers adopting demand-based pricing policies are, like value prices, not fully concerned
with costs. Instead, they concentrate on the behavior and characteristics of customers and the
quality and characteristics of their products or services. Demand-oriented pricing focuses on the
level of demand for a product or service, not on the cost of materials, labor, and so forth.

According to this pricing policy, managers try to determine the amount of products or services
they can sell at different prices. Managers need demand schedules in order to determine prices
based on demand. Using demand schedules, managers can figure out which production and
sales levels would be the most profitable. To determine the most profitable production and sales
levels, managers examine production and marketing cost estimates at different sales levels.
The prices are determined

by considering the cost estimates at different sales levels and expected revenues from sales
volumes associated with projected prices.

The success of this strategy depends on the reliability of demand estimates. Hence, the crucial
obstacle manager's face with this approach is accurately gauging demand, which requires
extensive knowledge of the manifold market factors that may have an impact on the number of
products sold. Two common options managers have for obtaining accurate estimates are
enlisting the help from either sales representatives or market experts. Managers frequently ask
sales representatives to estimate increases or decreases in demand stemming from specific
increases or decreases in a product or service's price, since sales representatives generally are
attuned to market trends and customer demands. Alternatively, managers can seek the
assistance of experts such as market researchers or consultants to provide estimates of sales
levels at various unit prices.

COMPETITION-BASED PRICING

With a competition-based pricing policy, a company sets its prices by determining what other
companies competing in the market charge. A company begins developing competition-based
prices by identifying its present competitors. Next, a company assesses its own product or
service. After this step, a company sets it prices higher than, lower than, or on par with the
competitors based on the advantages and disadvantages of a company's product or service, as
well as on the expected response by competitors to the set price. This last consideration—the
response of competitors—is an important part of competition-based pricing, especially in
markets with only a few competitors. In such a market, if one competitor lowers its price, the
others will most likely lower theirs as well.

This pricing policy allows companies to set prices quickly with relatively little effort, since it does
not require as accurate market data as the demand pricing. Competitive pricing also makes
distributors more receptive to a company's products because they are priced within the range
the distributor already handles. Furthermore, this pricing policy enables companies to select
from a variety of different pricing strategies to achieve their strategic goals. In other words,
companies can choose to mark their prices above, below, or on par with their competitors'
prices and thereby influence customer perceptions of their products.

For example, if a Company A sets its prices above those of its competitors, the higher price
could suggest that Company A's products or services are superior in quality. Harley-Davidson
used this with great success. Although Harley-Davidson uses many of the same parts suppliers
as Kawasaki, Yamaha, and Honda, they price well above the competitive price of these
competitors. Harley's high prices—combined with its customer loyalty and mystique—help
overcome buyer resistance to higher prices. Production efficiencies over the last two decades,
however, have made quality among motorcycle producers about equal, but pricing above the
market signals quality to buyers, whether or not they get the quality premium they pay for.
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