CHAPTER 2

STRATEGIC PLANNING
AND FORECASTING
Formal Planning - is the process by which marketing
activities are identified and decided upon.
-It is the process by which identifies the customer wants
and anticipates his future needs and wants. Large and small
companies can yield many benefits in the formal planning
process. It encourages management to think ahead
systematically its future actions.
-Company goals and objectives lead to better coordination
and provide clearer performance standards for operation
control. Sound planning helps the organization to anticipate
and make responsible action to marketing problems and
changes in the business environment.
Strategic Planning
There are three important Planning Strategies:
1. The Annual Plan - It the current marketing situation that is
identified and the company sets its goals and objectives towards
the currently prevailing situation in the marketing environment.
The annual marketing budget is prepared together with its action
program that will be implemented.
2. The Long-range Plan – it covers a period of about five years or
more. It is setting the company direction for a longer period which
shall be updated by the annual plan.
3. Strategic Planning Process – it is the process of anticipating and
developing long range objectives and goals. It is maintaining
strategic fit between the company’s goals and capabilities and the
changing marketing environment. It is the set of all planning
activities that identifies its vision and mission, its company
portfolio and attendant strategies.
 PLANNING

Strategic Marketing Planning

THE THREE LEVELS IN STRATEGIC MARKETING PLANNING:
1. Strategic Company Planning – is definng the organization
mission and vision, setting long range goals, and formulating brand
strategies to accomplish the goals. It sets in all direction in all other
areas of the functional organization such as production, finance,
human resources, research and evelopment, and finally marketing.

Four Essential Steps in Company Strategic Planning:

a. Define the organizational mission.
b. Analyze the marketing situation.
c. Set the organizational objetives.
d. Define the suitable strategies to achieve the desired objectives

2. Strategic Marketing Planning – is the function of the higher

management in setting the goals and strategies of the marketing
organization
Five Steps in Marketing Planning:
a. Conduct situation analysis.
b. Develop specific marketing objectives.
c. Determine product positioning and establishing differential
advantage.
d. Select target market and measure market demand.
e. Design a strategic marketing mix.

3. Strategic Annual Planning – is the process of making short term

plans in an annual basis. The strategic marketing plans prepared by
top executives are now developed in achievable levels in shorter
period of one year.

Responsibilities of Managers in Annual Planning

f. Define the annual specific target objectives for accomplishments.
g. Develop specific measurable and achievable plans.
h. Develop strategies and tactics to achieve the plans.
i. Prepare annual budgetary requirements.
FACTORS TO CONSIDER IN PREPARING ANNUAL
PLANNING STRATEGIES:
1. Analyze Previous Year Performance
2. Set Accurate Timelines
3. Develop Distribution Strategies
4. Create a Workable Financial Budget

CONTENTS OF THE ANNUAL MARKETING PLAN

5. Executive Summary
6. Situation Analysis
7. Program Objectives
8. Program Strategies
9. Program Tactics
10. Financial Schedule
11. Program Timetable
12. Evaluation Procedure
Demand Forecasting – is the establishment of product sales in the
future or a period of one year. It is the cornerstone of successful
marketing planning.

Methods of Forecasting Future Market Demand:

1. Marketing managers have the task of estimating market share for
their product. It is a projection of how the product will compete
with other or similar product in the market. The estimate can be
based on the general factor on specific marketing plan.
2. The finance department has to prepare budget to sustain the
needs of marketing in terms of its operating expenses. Marketing
people will have a clear direction on how they can penetrate the
market. Demand forecasting must be made accurately as possible
as it is a system guide to define target market.
Defining the
DIFINING THE MARKET
The old definition of market is “it is a physical place where people
meet to sell and buy the product for their needs and consumption.”
The development of modern towns and cities in the country had
changed the landscape definition to shopping areas and malls. The
present economist’s has broadened the definition of market.

Market – it is a set of all actual and potential buyers of the product

or services.

Market Potential – is the total sales volume that all organizations

selling a product during the specified time and place could expect to
achieve under the ideal sales condition.

Sales Potential – is the portion of the market share that the

marketing organization expects to penetrate and make sales.
METHODS OF FORECASTING DEMAND
Market Share – is the proportion of the total sales of the
marketing organization in the total market.

Sales Forecast - is the estimate of probable sales that the

marketing organization aims to achieve in the period of one year or
more.

METHODS OF FORECASTING DEMAND:

1. Top-Down Approach – is the major activity of top
management in forecasting market demand based on the
analysis of the total market condition and analysis.

Under this approach, management has to:

a. Develop a forecast of the general economic condition.
b. Determine the total market potential.
c. Measure the current market share, and
d. Forecast the projected product sales.
2. Bottom-Up Approach – is the forecasting method wherein
the management get information directly from sales people who
are in touch with the customers or the dealers and ditributors of
the product.

Under this approach management has to:

a. Get information from sales people who are exposed to the market.
b. Analyze the information based on previous sales,
c. Make reasonable and accurate estimates, and
d. Make a total sales forecast for a given period.
Marketing Organizations commonly use a 3-step procedure:
1. Environmental Forecasting – it involves projecting the countries
inflation rate which is determinants of pricing strategies. Interest rate
also affect the business condition as industries have to contend with
twhat they can afford to spend for their production requirement.

2. Marketing and Industrial Forecasting

Market forecasting is the art of determining the people’s needs and
wants. All forecast under these conditions point to what people say
about the product and service. It involves gathering information from
people who are actually users of the product through survey or
marketing research.

3. Company Sales Forecasting

The company carries its product or brand in the market. Market
forecasting involves analysis of the total market share. Analysis of this
important market information should serve as the sound basis of
company sales forecasting.
DEMAND FORECASTING ANALYSIS
DEMAND FORECASTING ANALYSIS:
1. Marketing Factor Analysis
The future of the product in the market is related to the buying
behavior of certain market forces. It entails determining to what
these factors are and measures its relationship to corporate sales
activities.
The market factor forecasting models uses two important methods:
a. Direct Derivation Methods – The very good example under this
method is to make projections on the number of school children
who are enrolled in the private schools starting at the pre-elem
level.
b. Correlation Analysis - It is a statistical refinement of the direct
deviation methods as it involved analysis of data based on
research findings. It includes an analysis of the correlation of the
potential sales and marketing factors that directly affect sales
performance. This analysis gives more accurate estimate of the
market demand. Since correlation analysis is based on research,
its accuracy is presumed to be more accurate than the direct
deviation method.
2. Survey of the buyers Intention
This process involves asking potential customers about the product
that the marketing organization produces at the price index at the
given time.

3. Test Market Method

This method is used when marketing organization is launching a new
product or the innovation of an existing product. Sampling
procedure is done in a limited geographic area and measures sales
performance.

4. Post Sales Data Analysis

The method is entirely based on the last year total sales and the
profit index generated. This is the simplest and easiest to apply
and understand. This is based entirely on past performances
without regard to changing marketing environment.
5. Sales Force Opinion and its Composite Index
This is the bottom-up Approach where the sales force provides the
information about the forecast demand for the product. The
composite sales force index of information is collected and analyzed
according to the perceptions on the market. The sum of the
information gathered from the sales territories covered by the sales
force maybe the true and reliable index of market demand as they
are in direct with the buyers.

6. Executive Judgement and Expert Opinion

Some corporate executives who came from the ranks of junior
marketing managers may have developed the ability and expertise to
make reliable marketing forecast. When this happen, the forecast is
called Top-to-Bottom Approach. The expert judgement of the top
marketing executive will now form the bases of the marketing staff
to draw the sales figure for the next succeeding year.
Participative executives may get the opinion of experts, salesman
dealers, and distribution to drum up a more reliable sales forecast
and develop marketing strategies to achieve sales target.
Characteristics of Potential Buyers

Potential Buyers – are those who are interested or have the

capacity to purchase product.
Characteristics of Potential Buyers:
1. Interest – it is the state of mind of potential buyer who likes to buy
the product for his needs and wants. A customer who sees a new
hand phone is a potential buyer but he might not have at the
moment enough money to purchase the said item. Interest alone is
not enough to call him a buyer. Potential market is the set of
consumers who profess some level of interest for a particular product
or service.
2. Income or Money to Buy – Potential buyers must have the money
to buy the product or service. Money is the most important
determinant for the customer to buy the product he wants for
himself or he must have enough income to own the product. Income
is the state or capacity to purchase the product either in cash or
instalment.
3. Access or Place of Distribution – The potential buyer must have
access to the goods or product he wanted. One ay have the interest
and money to buy the product yet he lives in a rural community
where the product is not available.