4.2 Marketing planning


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One of the most important tools that the IB student will have at his or her disposal is the Marketing Mix! This tool is particularly effective in effectively analyzing the market as well as being used to evaluate the effectiveness or outcome of other tools such as the Boston Matrix or the Product Life Cycle.

Remember that the aim of the CMO (Chief Marketing Officer) is to effectively integrate and assemble all marketing programs in order to create and deliver value to consumers. With the Marketing Mix decisions are made under each of the P’s in order to influence a network of relations in creating these values. The concepts are described using words beginning with the letter P.
Physical Products are assessed using the traditional four P’s of the marketing mix: product, place, price, and promotion.
Services are assessed using the 7 or 8 P’s of the marketing mix: product, place, price, promotion, people, process, physical evidence and packaging. Do not be confused with seeing other representation of the marketing mix in terms of the number of P’s. Invariably the aim of the mix is to provide the seller with a simple means of focusing on a main strategy for marketing. There are as many P’s as variations that marketers can think of, however, for our purposes those listed below are sufficient.
Each of the P’s represents a tool available to the seller on how to best deliver value to consumers profitably. The use of the P’s should result in a customer who is ready to buy with all that is remaining being making the product or service available.
Marketing mix
Product
This aspect represents any element of the product that may be improved or changed including quality, design, variety, accessories, branding, or packaging among others.
Place
In sales the more points of sale available to the consumers the more likely sales will occur. It also critical to remember the place does not only represent a physical location. Therefore, place includes an Internet website, telephone or postal orders. Place also invariable implies distribution channels.
Price
Pricing strategies imply all the methods available to the seller to convince the consumer that the value proposition is attractive. If a product is priced right, we are inclined to agree with the value proposition. Therefore, list prices, discounts, credit terms are tools used in pricing the value proposition.
Promotion
The difference between advertising and promotion is that advertising builds your awareness of the product, while promotion gives you the reason to buy. In the marketing mix promotion includes advertising, sales promotion and public relations.
People
As you can imagine, for services client contact is the most vital part of the transaction. Therefore, the training, qualifications and competence of the people or labor is critical.
Process
How the service is delivered refers to the process. In MacDonald outlets the drive-through is part of the process as is the self-service at the counter. Some restaurants will deliver your food dressed in traditional representative clothes or even on roller skates!
Physical evidence
Although a service does not imply there being a physical product, there is however always some evidence that the delivery took place. Once you graduate from your educational institution a diploma is evidence of the teaching service lecturers have delivered.
Packaging
Packaging of physical products would imply presentation. Consider a meal in a gourmet restaurant or the impressive and artful packaging of Apple products.
LO. Apply the elements of the marketing mix to given situations.
When Apple Computers launched the Ipad series, its strategy can be clearly seen when applying the marketing mix.
Product: The Ipad was not a new product, but had evolved from previous tablets. However, this design of the product was very distinguishable from its predecessors. Apple also had the advantage of the “halo effect”, whereby Apple products on account of historical success and known quality, were bought on good faith. Therefore the brand name Apple played a significant role in this successful launch.
Place: The Apple Ipad was very accessible. Multiple points of service included the traditional electronic stores, retailers, multiple authorized dealers on websites, and Apple’s own website. The distribution channels and coverage locations of Apple are not only regional but also global.
Price: The pricing strategy that Apple adopted was that of price mark-up. Apple charged a price of $500US which was above the manufacturing costs of $325.50 for the Ipad2
Promotion: Traditionally Apple always had its late CEO and founder Steve Jobs reveal the new product. Therefore with media fanfare and expectation, the launch of the Apple Ipad was followed by above and below the line promotions, a blitz of advertising and public relations.
HL Only LO. Discuss the effectiveness of a selected marketing mix in achieving strategic objectives.
With a good selection in the marketing mix, strategic objectives are an important part of successful marketing management and marketing leadership. As part of the marketing mix, promotion through the Internet can be used as a powerful information and sales channel, significantly increasing geographical reach. If the business were to transform its marketing strategy in this medium, its core approach would be to adequately communicate to the target market by maximizing all marketing information systems.
Pricing collaborations can also be an effective strategic objective. One or more businesses frequently join in a special pricing collaboration. Hotel, airlines and restaurants or car rental companies often offer discounts in pricing collaborations.
When it comes to a company’s core competency, partnerships are formed to create joint products. These strategic alliances take advantage of the synergy and also evolve through marketing alliances. By jointly marketing their complementary products or a new product businesses are able to leverage their capabilities and resources.
LO. Construct an appropriate marketing mix for a particular product or firm.
The marketing mix for McDonald’s, the fast food franchise, is easily constructed as follows:
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Product: McDonald’s offers a variety of fast food products including meals targeted to a younger audience, the Happy Meal. The products are well packaged and come in a broad variety. The McDonald’s brand name is of significant value at approximately $US 81Billion!
Place: The franchise owner operator outlets are the primary points of service for consumers. The drive through, home delivery and telephone orders also serve as additional service points. McDonald’s has a presence on Auto-routes and other locations such as airports and amusements parks.
Price: The pricing strategy adopted by this fast food chain is clearly designed to promote sales. Meal combinations at discounted prices, compliment the list prices on offer.

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Promotion: As a worldwide franchise operation the promotion campaigns of the McDonald brand are well know. Themes such as “I’m lovin it” are translated across the globe in a mass media or above-the-line marketing strategy.
Ethics of marketing
LO. Discuss the ethical issues of what is marketed and how it is marketed: nationally, internationally and across cultures.
The consumer evaluates products and services by combining their positive and negative brand beliefs, according to importance. By consequence, business is constantly watching market trends in order to capitalize on them and corporate social responsibility in marketing has become a growing practice.
Some marketing approaches have drawn sharp criticism from “watch groups” on ethical grounds. False advertising may include labels that make claims that are not truthful, for example Pure Juice, may not be 100% Juice. By failing to be truthful or conduct themselves according to the expected codes of behavior in a society, distrust and disdain for the business may arise, thereby inflicting harm on the brand value.
Business that is not conscious of the effects of marketing their products in diverse cultures where, for example, in Muslim cultures the female body is not portrayed openly, will have failed to understand the core values or belief systems that underlie attitudes and behavior.
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Companies such as The Body Shop have built their reputation on not conducting tests on animals. This global appeal transcends borders and cultures. By targeting consumers on the basis of their core values, marketers have been able to appeal to and thereby influence purchasing behavior.
Marketing audit
A marketing audit is the examination of a business’ marketing strategies, objectives, environment and activities. It is conducted periodically in order to identify both positive and negative impacts. Once these have been independently verified, the aim is to locate problem areas and make recommendations for corrective action or reinforce the positive.
LO. Explain the value of a marketing audit as a business tool.
The average U.S. Corporation will lose up to 50% of is customers within a five year period. In addition to this 50% of its investors will be lost within the first year and 50% of its labor force within four years time. By identifying the causes related to this defection and loss, a business is able to stop the hemorrhaging of labor, investment and sales. Conducting a market audit enables the firm to achieve efficiency and expose weaknesses and strengths. In light of an ever-growing competitive market, the audit will indicate the most needed improvements and the corrective-action required.
HL ONLY Porter’s five forces
LO. HL Only Apply Porter’s five forces model to classify and analyse competitive pressures in the marketplace.
Michael Porter, a professor at the Harvard Business School, identified five forces that influence a business in the marketplace. The attractiveness of the marketplace is therefore determined by the threat to the business while in the market. These five forces and the model indicate that the potential threats are:
  1. The threat of Industry Rivalry: A marketplace is not attractive it has intense competition, pricing wars, the introduction of new products or constant promotion campaigns. The number and variety of competitors is a threat that will determine if a business should enter or exit the market.
  2. The threat of new entrants: Similar to the above, if barriers to entry and exit are very low and new entrants swarm the market, the overcapacity will lead to falling prices and consequently earning. The best case would be for entry and exit barriers to be high. This basically means that barriers such as technology, or finance do not allow everyone to join the market. In addition, if the high investment will lead to a difficult exit, this is also a desired high barrier effect.
  3. The threat of substitute products: If advances in technology or price declines occur, this is a threat that is undesired. The actual or potential substitute effect due to price changes will draw away earnings and profit.
  4. The threat of buyers bargaining power: When buyers are organized and concentrated they are capable of inflicting influence due to pricing sensitivity. A slight increase in price will lead to declining earnings and profit.
and
  1. The threat of supplier bargaining power: When suppliers are able to raise prices due to the lack of an alternative, this will also adversely affect earnings and profit. By being organized or concentrated, suppliers can pose a challenge. Having multiple supply sources or deciding on backward vertical integration (buying or merging with the supplier) is the best solution.
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Marketing objectives

LO. Examine how appropriate the marketing objectives are in achieving the goals of an organization.
Marketing objectives must be definable and quantifiable so that there is a target on which to focus.
Objectives motivate staff, provide a common goal and create a clear focus for the business. They are an integral part of the marketing plan and therefore evaluated by the degree of success achieved in attaining them.
The goals of the marketing department business can relate to any aspect of the marketing mix, but they they must meet the criteria of being SMART; Specific, Measureable, Attainable, Realistic and Timely. In addition, internal and external restraints must be known. Internal restraints may be financial or resources related, while the external restraints may involve suppliers, competition or the economy.
Market research
The definition of market research would be stated as the systematic design and collection of data for analysis and findings that relate to a specific marketing objective of the business. Consumers leave traces of their purchasing behavior in product scanning data, credit card and loyalty databases, and catalog purchases. By having access to this data, the business can more effectively meet, anticipate and predict the needs of the consumer. These cause-and-effect relationships have become highly specialized due to the growing role of technology.
Role of market research
LO. Analyse the role of market research.
Marketing research is generally 1% - 2% of company sales. Although most businesses conduct their own market research, some hire external research firms to carry out the exercise. Market research is designed to define the challenges faced and to arrive at realistic solutions. The collection of market related data assists management in making decisions on how to resolve the challenges faced. Have you been presented with a survey, online perhaps?
LO. Evaluate different methods of market research.
Primary and secondary research
Secondary data is data that already exists, while primary data is information that has just been gathered. Therefore primary data is fresh while secondary data is old.
An example of Primary data collection is the use of surveys and questionnaires. This process can be time consuming and therefore expensive. Worker will need to be hired and trained in the collection of data.
Another primary research approach is focus group research where 6-10 people of selected genders, ages, or interests are collectively or separately observed, sometimes behind two-way mirrors in an adjacent room. By having a professional research moderator provide questions or observe activities, the participants are usually paid for their time while their behavior or response is recorded and analyzed.
Secondary data is usually too broad and unrepresentative. Although less expensive than primary data, it may be outdated. The crudest form of secondary data use is by leafing through a telephone directory. Professional research companies will sell low cost and readily available data that distinguishes between income groups, gender and ethnicity or marital status among others. If the data needed does not exist, is outdated or unreliable, then the business will have to resort to primary research data collection.
Sampling
Sampling comes is a variety of forms. Once it has been decided on the contact method, the market researcher has to decide on who should be sampled, how many samples should be collected and how the targets should be selected.
Methods of sampling & Limitations of sampling
Contact can take place via the Internet and email, in person, or by telephone. The personal interview is the most expensive but can also be subject to bias on the side of the interviewer. Arranged interviews are usually conducted by appointment and are over the telephone, while intercept interviews are conducted by stopping people in the streets or while they are shopping. The problem with intercept interviews is that due to the randomness of the approach, they run the risk of including unwarranted or nonprobability samples. Telephone interview are the most effective form of personal interviewing, however this method of sampling is facing increasing challenges and it infringes of personal privacy.
If you receive spam mail or unwanted pop-ups then you recognize the challenges consumers face with this method. However, online sampling has grown in importance and expands the possibilities for business to collect data.
Sampling errors

Sampling errors will arise due to poor planning and application.
If the problem is poorly defined or the sampling overly relies on one approach, these will all lead to sampling errors. In questionnaire design, the word, forming and sequence of questions must not mislead the respondent.
It is therefore critical that the research account for a + - margin of error in the data samples collected. At its best the research will use a variety of methods to increase confidence in the outcome.
HL Only; LO Evaluate different methods of sampling, for example, quota, random, stratified, cluster and snowballing.
A quota is whereby the data collector has a limited number of data collected in several categories. For this choice, it may not be necessary to sample the entire target population and by limiting the number the business is able to meet cost or time factors.
A simple random sample will assume that every member of the sample population has an equal chance of selection. This probability sample will limit bias and allow for a broader representation.
Stratified samples are data collected in exclusive groups perhaps people over 40 years, and people who are female. Random samples may then be drawn from these groups. This probability approach is useful for a more specialized insight into a target group.
A cluster sample is an area such as a particular neighborhood, town or region of the country. In drawing information that is more specialized, this approach will provide a less distorted data set.
Snowballing is the use of referrals from the data sample to continue the collection. Therefore the group appears to getting bigger like a snowball rolling down a hill. The usefulness in this is that bias is removed form the sampling and is highly focused.
Market segmentation and consumer profile
LO. Analyse the usefulness of market segmentation and consumer profiles.
In order to effectively target consumers, businesses will group them according to select criteria of the consumer market. The criteria can include but is not limited to geography, usage rate, benefits desired, among others. We can also include, of course the personalities of the consumer, but he most important will always remain the demographic variable. Demography means the study of the population and demographic segmentation is conducted by dividing consumers by age, income, family size, gender, occupation, and other multiple qualifications of choice.
Targeting
After segmentation, the decision to focus on a particular group is referred to as targeting. McDonald is India, as an example will use lamb and not beef in its hamburgers. This is geographical targeting. The magazine Glamour targets the female gender and GQ the male gender. Statistical methods are used to identify and target groups, however the five key criteria for market segmentation include being:
1) Measurable; whereby a qualities of the groups can be measures if not by size, then by income.
2) Substantial; whereby the group is large enough to attract the attention and interest of business
3) Accessible: whereby the target group can be effectively reached
4) Differentiable; whereby the segment is distinct in purchasing habits or needs.
5) and actionable.; whereby marketing campaigns can be devised to influence the group.
LO. Identify possible target markets
Target groups are prone to changes and shifts. Consider the ageing population in Europe, or the growing purchasing power of teenagers. Do each of these groups meet the target criteria listed above? If married and unmarried men both purchase the same beer, they may not be a target group for beer companies; however, a car company may target them in their identifiable segments.
LO. Apply an appropriate marketing mix to the target market(s).


Most teenagers can be targeted on the basis of the marketing mix. Consider the popular game Battlefield 3. The 4p’s of the marketing mix are well positioned to target teenage boys.
The product has been designed to be visual and attractive to the target. The product meets the gaming needs of teenagers by having created graphics that are exceedingly attractive and by pricing it well within their range.
The price is within the means of the target, however the pricing policy is one designed to achieve a premium in profits.
The promotion is primarily online where most of the target audience spends time. Teaser trailers on YouTube and on national television have culminated in an effective advertising campaign.
The place or distribution is also online where most of the target audience spends time as well as through gaming retails outlets.
Positioning
When a business has formulated a method of placing a distinct recollection of the product in the mind of the consumer, it has achieved positioning. This may be done through a subtle positioning approach, such as a product being used in a popular movie. Brand positioning in cinema is paid for by the Brand Owner and is part of the budget of film production. Popular Brand Positioning occur with: Audi in the film I, Robot, BMW in Goldeneye, and many more including the Courier services UPS and FedEx.
Corporate image
An effective Public Relations department will promote and sustain the image perceived by the broader audience of the company. Some of the prominent tools used in promoting a positive image include:
  1. Publications such as websites, annual and quarterly reports, monthly or yearly magazines, and brochures.
  2. Events that promote the image of the business include competitions such as marathons, exhibitions, news conferences or seminars and a multitude of other possible functions.
  3. Sponsorship of social causes or public events
Position/perception maps
LO. Construct a position map from given information.
Visually allowing marketers to display products in the context of two different variables is the role of the Product Positioning map. This visual overlay of consumer preferences will reveal holes or openings that could suggest possible action.
The two variables against which a product is positioned may include any desired or existing aspect. Competing products would be placed in the Product Position Map in order to illustrate the conditions of the market. The business is then able to better determine how to place its products more competitively.
Product Positioning Map
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Unique selling point/proposition (USP)
Any strategy that is used to distinguish a business product from that of competitors is referred as the USP or Unique Selling Proposition.
LO. Discuss how organizations can differentiate themselves and their products from competitors.
Branding is the process of creating a distinction between products. By educating consumers on a business product through brand recognition, this in turn clarifies purchasing decisions. Beyond the name, sign, symbol or design are the qualitative features of the product. This may lie in the association with quality, reliance or any product attributes.
Development of marketing strategies and tactics
LO. Design or evaluate marketing strategies for given situations. Apply an appropriate marketing mix to the strategy.
LO. HL Only Develop and evaluate strategies designed to change customer perceptions.

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As previously illustrated, the “back to basics” strategy of Harley Davidson is a perfect example that saw changes in consumer perception as product-quality was improved and strong brand community was created though HOGS (Harley Owners Group). The marketing strategy adopted by Harley Davidson was defined by identifying the problem of a failing brand. New competitors in the marketplace, new technology and shifting demographics were also part of the appropriate mix needed. In terms of the Product, the Harley Davidson machines were reviewed and subsequently modified to suit for better quality and performance. The Price and Place of the business remained relatively unchanged, however the Promotion aspect shifted considerably. Using the Promotional tactic of a USP, the Harley Davidson Company creation of HOGS, and the latters sponsorship of charity rides, biker rallies and other events, eventually led to a revitalization of the brand with demand now exceeding supply.
Sales forecasting and trends
In order to safeguard from being caught unaware, business always tries to predict trends or patterns that will occur in the future. With historical data, a business is able to examine sales trends and thereby create a sales forecast.
Seasonal, cyclical and random variation
Seasonal Variation: Calendar periods during which more or less demand for consumer products is evident is referred to as a seasonal trend. Pre-Christmas sales or post summer sales are both identifiable trends that affect business sales. Seasonal adjustments in all data take into account these seasonal changes for a more accurate understanding of the trend.
Cyclical Variation: The business cycle is an economic trend comprising of upturns and downturns or recessions and booms. All economies undergo these trade cycles, which always vary in duration and intensity. These periods of boom and bust will affect consumer spending and thereby sales.
Random Variation: Shocks or expectations in the market will create a unusual boost or slow-down in sales. Random shocks can be in the form of an earthquake resulting in depressed sales, or unusually snowy conditions, resulting in high snowboarding ticket sales.
LO. HL Only Analyse sales trends and forecasts from given data, and evaluate the significance for marketing and resource planning.
In order to identify a trend from data, we must distinguish between the terms used.
In sales forecasting, the Moving Average is determined by calculating the average of any series of date. The process of Centering is then used to find a midpoint of the Moving Average.
Yearly Sales of a Fashion Boutique ($000)
2002
2003
2004
2005
2006
2007
2008
2009
20010
2011
400
200
600
100
95
250
450
500
800
700
400 300 265 148.4 265 400 583.3 666.6

In the year 2003 the moving 3-year average is calculated by determining the Moving Average of the years 2002, 2003 and 2004.
This is 400+200+600/3 = 400.
In the 2004 moving 3-year moving average the last sales figure for 2003 is included as is the 2005 figure
This is 200+600+100/3 = 300
In the 2005 moving 3-year moving average the last sales figure for 2004 is included as is the 2005 figure
This is 600+100+95/3 = 265
A sales forecast can be for any period such as weekly, monthly, or yearly with trends for any desired moving average created, e.g. two year, three year, or eight year for any period desired. The trend lines eliminate fluctuations and present a more accurate picture for predictions.
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