Developing Short-Range Marketing Plans

BY ANDRALL E. PEARSON

Even though top management should not get involved in the details of the company's marketing planning effort, it does have a crucial role to play in approving the basic strategy. And it needs to know enough about the planner's art to be sure the planning is done properly. This perceptive analysis of the four phases of the planning process offers useful insights for both top management and the marketing planner.

_ -N MANY LEADING COMPANIES, t h e s h o r t - r a n g e

marketing plan is the focal point for organizing marketing efforts for the coming year. Such a plan estabhshes specific steps based on company objectives and strategies that must be taken in the next year to achieve corporate profit and competitive goals. Unfortunately, many companies waste considerable time and effort developing marketing plans that cannot be used. Successful marketing plans are generally developed in four phases: (l) searching analysis of the industry, (2) objective appraisal of the company's chief problems and opportunities, (3) formulation of objectives and strategies on the basis of the industry and company analyses, and (4) development of programs to implement those strategies. The first phase in the development of a useful marketing plan should be identification of trends or developments in the competitive environment that significantly affect the company's operations. For example, the Coca-Cola
ANDY PEARSON, a Director in the New York office, has special responsibility for the Finn's marketing practice. This article will appear as a
chapter in HANDBOOK OF MODERN MARKETING, edited

by Victor P. Buell, to be published later this year by the McGraw-Hill Book Company. It appears here by special permission of the publisher.

Company's success with the soft drink "Fresca" was the result of its assessment of two separate trends: increased use of dietetic drinks and increased use of "light" beverages. Assuming that these two key trends would greatly enhance the success of Fresca, the company introduced it into test markets. Conversely, the Ford Motor Company ignored the trend toward smaller, low-priced cars when it introduced the large, medium-priced Edsela widely publicized failure. In a practical sense, then, marketing is simply a process of serving customer wants or needs. To recognize actual and potential marketing problems and opportunities, the marketing planner should know a great deal about the consumer. But beyond that, he should have an overall knowledge of the marketing process as it affects and is affected by changes and trends in the market.

Use of Flow Analysis "Flow analysis" can be an important aid to overall understanding of the marketing process. A flow analysis is a diagram depicting what happens in a product market at each stage of the product's movement from the raw-material state to its purchase by the customerand post-purchase service where appropriate. A typical flow analysis is shown at the top of Exhibit I. By grouping his analyses along the lines of the flow, the planner can relate shifts in one part of the marketing process to changes in another.
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For example, a major food producer gave little thought to a sizable shift in his volume from smaller stores to supermarkets, assuming that the shift was an inevitable development in the grocery industry. Further, he was satisfied that his product's market share was reasonably stable. Flow analysis, however, allowed him to study consumer usage patterns in relation to distribution channel data and revealed a major trend toward home consumption of the product, as opposed to restaurant use. This led him to compare his product's performance to the performance of its competitors. Consequently, he discovered that, although his product was gaining market share in smaller stores, it was actually losing overall market share because of the fact that it was less well suited to the home consumption market than its competitors. A leading metals processing company's market position was deteriorating despite its fine marketing plans. When this company began to explore its competitors' raw materials and processing approaches in relation to market share trends, it quickly saw that it was being consistently underpriced and outspent because both its key competitors had clear-cut economic advantages in raw materials and processing. Neither of these two company managements was naive. The problem was simply that they had focused exclusively on their own products and customers without trying to find out why their key competitors were able to outperform them in the marketplace. Companies face two basic types of constraints, marketing and economic, in their

Exhibit ;

Analyzing the mariteting process

Raw materials

Production

Wholesale distribution

Retail distritHJtion

Consumer or user

Afterpurchase service

COMPETITORS

MAJOR CHANNELS

PRODUCT

Number, profitability, degree of integration, cost advantages/disadvantages

Where are products bought? How do products reach points of sale?

Variety, design, price quality, and performance characteristics

TECHNOLOGY

DISTRIBUTION FUNCTIONS

CUSTOMERS

Product and process improvements Rate (life cycle) Lead time Market impact (primary volume versus share) Economics (price of innovation versus cost of obsolescence) Hov^ interrelated are product and process?

Functions of each type of distributor-physical distribution, product promotion Compensation of distributors gross and net income relative to other products handled Range of products, brands handled

Who buys (e.g., demographics, core users)? Who consumes?

USAGE AND BUYING PATTERNS

Frequency, quantity, timing of purchases Applications, substitutes, seasonality Buying influences

INVESTMENT AND CAPACITY CHARACTERISTICS PRICING

Relative significance of cost and investment Extent of capacity and trends Pattern of entry

Range of price levels Volumes at each price level Logic and industry leadership

(Note: Often useful to develop frequency distributions on customers, products, orders. m d outlets)

SERVICE CONSIDERATIONS

Frequency, variability of need Technical requirements

marketing planning. Marketing constraints include levels of the competition's product performance, distribution outlets needed to match competition, and the strength of the consumer franchises enjoyed by competition. Economic constraints include the company's cost structure relative to those of its competitors, its need to integrate forward or backward, and its access to capital for expansion. There are no hard and fast rules for deciding what kinds of analyses to make to identify the economic and marketing constraints in any given situation, but the following four economic analyses are usually worth considering: 1. The industry's cost and profit structure 2. Behavior of costs at various volume levels 3. Sources of profit for each major competitor 4. Relative sensitivity to different management actions. Some examples of marketing analyses that are often useful to consider are shown in Exhibit I, page 43. After the marketing planner has analyzed his industry and determined which trends or developments will actually affect the company, he must make clear the relevance of those trends or developments called for in his plan. Moreover, since facts included merely to demonstrate the completeness or logic of the underlying analysis rob the plan of focus and reduce its readability, the planner should discipline himself to omit from his plans all information that is unrelated to specific action. One of the commonest defects in marketing plans is inclusion of such things as elaborate brand
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switching analyses or exhaustive sales performcince histories by company and product line, which lead to no logical actions whatever. For instance, a planner may demonstrate conclusively in his plan that industry technology is slowing down and becoming less productive. That may be an interesting insight. But what, if anything, does this development mean in terms of the company's new-product development strategy? Should the company shift its emphasis? Cut back its program? Reduce its expectations? Clearly, these are the real issues.

Appraising the Company's Position

Because what is going on in the industry almost always affects the company and vice versa, the marketing plarmer appraises his company's problems and opportunities by making two kinds of analyses: comparisons within the industry and comparisons within the compjuiy. The marketing planner should assess his company's competitive performanceboth historical and currentin all key areas. Again, flow analysis can help the planner, allowing him to compare his company's performance to its competitors' at each stage of the product's movement to the marketplace. Often, too, data that are considered insufficient are merely not being used effectively. There is a good deal of truth in the common notion that American packaged goods companies excel in marketing because of superior information pertaining to each stage in the

product cycle. Experience indicates, however, that determination and resourcefulness can help the planner make effective use of limited data. For example, two of the most imaginative and productive company performance appraisals I have seen were done by a European consumer products producer on the one hand and an American equipment rental concern on the other. In both cases the planners had been told, "We just don't have the data available to make a useful evaluation of performance or market potential." Intemal company analysis can reduce the problems or enhance the opportunities for improvements in company performance. Such analyses may include: 5 Comparing the perfonnance of each major market area to the company average 5 Comparing product line profits, costs, or sales trends with one another 5 Comparing company performance by distributor or end user on an index basis 5 Comparing past results with current results by area, product, or channel. Comparative analysis is not done simply to discover, for example, that perfonnance in Los Angeles is 210 versus Chicago's index of 73. This is simply the starting place in a reasoning process that says, "Why is our performance so much better in Los Angeles than in Chicago?" Often, differences in performance hold the keys to correcting poor performance. One company found three major differences between its operations in Los Angeles and Chicago that helped to explain why Chicago's performance was poor and suggested what needed to be done to improve it:

1. The company's relative advertising expenditures in Chicago had traditionally been about 35 percent of its advertising weight in Los Angeles. 2. The company's introductory promotional effort in Chicago was about one-fourth as effective (owing to a company-wide marketing budget cutback that had nothing to do with the product itself). 3. The company failed to market the product size preferred by Chicago consumers, and this caused it to miss nearly 20 percent of the potential major users of its products. All these may seem obvious conclusions that any well-run marketing group would quickly reach, but anyone who has worked very long with marketing data knows that it is difficult to decide which analyses should be made and even more difficult to establish cause and effect. In this case, for example, the company had always felt it was doing fairly well in Chicago because its dollar volume was good there. Comparative analyses like these can help generate ideas and hypotheses that will get the planner started on the track of a problem or an opportunityand thereby reduce the time wasted in trying to analyze performance without guiding hypotheses.

Statement of Assumptions

Having completed the company appraisal, the planner should have enough information to make certain assumptions about future operating conditions. Because these assumptions will be guidelines for anticipating develop45

ments that will influence the company's ability to reach planned goals, they should be carefully stated and explained in the written plan. A statement of assumptions is important because it carries the analyses of trends, discussed earlier, one step further and forces the planner to focus his attention on the future shape and importance of the key external conditions. Furthermore, defining assumptions provides an excellent means of ensuring that everyone in the organization is planning his own work on the basis of the same assumptions. Thus, for example, the production department will know that marketing is assuming an industry growth of 15 percent and will plan its own operations accordingly. Finally, recording assumptions makes it possible to review them as conditions change and to make sure that plans are adjusted to fit unanticipated developments. In the 1958 business downturn, for instance, many companies that had made no assumptions about the economy continued to operate as usual long after their policies and programs had become ineffective and inadequate. Clearly, it is not necessary to make assumptions about the entire range of factors that make up the national economy and the company's competitive environment. The key factors will vary from one industry to another and even from one company to another. Assumptions about labor strikes, for example, are very important in the steel industry but not in the chemical industry. Here are some assumptions that might have been included in the marketing plan of a leading industrial goods producer:
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With respect to the general economy, we assume that: 1. There will be no major change in the gross national product. 2. There will be no major strike affecting consumer buying practices. 3. There will be a 2 percent increase in the , cost of living during the year. With respect to our industry's competitive climate, we assume that: 1. Present industry overcapacity will grow from 110 to 125 percent as two new competitive plants come into operation. 2. Price pressures will reduce industry price levels by roughly 10 percent across the board. 3. Two new products will be introduced prior to the fourth quarter of the year by our leading competitors. Each month or quarter, when the marketing plan is reviewed, the assumptions are also reviewed. If they have not materialized, the plan can be modified accordingly; and if they have materialized, they will already have been factored into the planning.

Objectives and Strategies

There are almost as many definitions of the terms "objective" and "strategy" as there are authorities on planning. The following definitions are advemced here: Objective: The overall end result the company hopes to achieve (e.g., increasing sales by 33 percent). Clearly, using this definition.

objectives can be set for nearly any aspect of business performance, including sales, profits, j costs, and market share. Strategy: The approach by which the company plans to achieve the desired end result. We shall also distinguish between the two main types of strategy, overall marketing strategy and the strategy for a particular product line or brand. For example, a company's overall objective and strategy might be: i Objective: To develop a $500 million posi? tion in the home furnishings field without diluting our present ownership or holding back our eamings growth. Strategy: To build on our present strong ! position in the home fumishings market by ! entering four high-priority market segments through the acquisition of large, leading companies presently serving this market. Obviously, this strategy is specific enough to provide a basis for action. More important, it also reflects a conspicuous choice of direction (i.e., toward large, leader companies, not small ones; four high-priority market segments, not every or any market segment). For a particular product line or brand, the objective and strategy might be: Objective: To build our market share in this business from 20 to 25 percent, which will produce sales of $135 million and profits of $7 million this year. Strategy: To convince middle-income housewives that our product offers a superior taste through: (1) changes in our copy appeals, (2) revised media structure, and (3) a massive sampling program to secure high levels of trial.

Reasons for strategy: Our industry and company performance analyses show that: (1) consumers strongly prefer our product's taste, (2) our copy appeals have not stressed the new taste, and (3) only 15 percent of the target housewife group has tried our product, yet our repeat purchases are high among those who have tried it. Out of the industry and company analyses grows a selective identification of market-centered opportunities or problems. Out of these, in tum, flows the basic strategy for the business or product category. Finally, sales, profit, and share-of-market objectives are derived from an appraisal of the expected results of the strategy change. Obviously, if no major strategy change is planned, sales and profit goals will logically follow pretty much the same trends they have followed in the past. Clearly, this emphasis on changing a product or company strategy because of opportunities identified by market-centered analytical work is a much more realistic way to establish sales and profit objectives than merely legislating annual increases because of top management's understandable desire to "do better every year." It is also a key test of planning skills. A company that consistently fails to identify promising market-centered opportunities and generate the strategies and programs needed to capitalize on them is clearly not doing an effective job of planning. It should be emphasized here that strategic changes affect most operating departments, not just the marketing department. For example, any strategy that calls for product or package improvement will inevitably affect R&D
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priorities, production scheduling (and often production costs), and, of course, the company's financial needs and position. Accordingly, there must be effective coordination between the planners and the various operating departments of the business, as discussed later in this article.

Marketing Programs

The fourth phase in comprehensive marketing planning is the development of programs to implement marketing strategy. These programs cannot be, as is often the case, the first phase in planning. Rather, they must be based firmly on company strengths, limitations, and assumptions about the futurethe other three phases of planning discussed earlier. Many companies find it useful to set up specific quarterly programs as well as general yearly programs. Basically, there is no difference between these two types of programs. It is impractical and unnecessary to be very detailed or specific about programs two or three quarters ahead because conditions change too rapidly, but it is desirable to make specific detailed plans for the coming three months. A quarterly program might cover such factors as the objective of the program, how it works, where it will be used or conducted, the cost, expected results, assignment of responsibilities, and deadlines. A specific program of this kind helps the reader as well as the planner to get a picture of its key details. Moreover, it helps to secure approval of the
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program from executives in upper echelons because it gives them an adequate basis for deciding whether the program is well conceived and properly focused. One of the most successful devices for securing necessary action in the proper sequence on marketing programs is to insist on the inclusion of deadlines and assignments of responsibility in all written plans. This device forces the planners to think through the question of who must do what to assure action. The written word is a published persuader that stays in the mind of each executive who sees his name in print as being responsible for a certain action. Deadlines not only prescribe time limits but also establish priorities. In setting deadlines, it is necessary to consider cind weigh the importance of each program agcdnst all other demands on the time of those involved in carrying out the plan. Finally, a written assignment of responsibility and deadlines provides a specific and inescapable means of follow-up. Exhibit II describes a program to step up sales to oil company outlets (gas stations). This written program shows clearly that Mr. Murphy missed his deadline and thereby delayed completion of the final project. Having determined that the deadlines were realistic. Murphy's boss has sufficient evidence to deal with this problem and to correct Murphy's misguided sense of priority. Without such written deadlines it is all too easy to let critical steps fall by the wayside. Setting deadlines and defining responsibility will not automatically produce results, but they almost invariably improve the batting average, espe-

Exhibit II

Assignment of deadlines in a mariceting program

RESPONSIBILITY DEADLINE COMPLETED

STEP

1. Develop form to analyze capacity of present dealers to sell oil outlets

JONES

6/10

6/10

market research 6/25 6/25

2. Use form to evaluate dealers' ability to sell oil outlets

MURPHY

sales manager 6/30 6/30

3. Visit all potential oil outlets and determine present as well as potential sources 4. Relate findings of dealer analysis and field visits; establish necessary sales progams for each dealer

Each district manager

MURPHY

7/15

8/15

sales manager

5. Determine results of sales calls by each dealer on oil company outlets

JONES

8/15

9/15

market research

dally if the key marketing executive personally follows up. An obvious requirement of comprehensive marketing planning is to aim every action program at the accomplishment of a specific marketing strategy. The advantage of being able to relate marketing action programs to specific and stated strategies is twofold. First, the programs will be helping to accomplish specific, measurable end results rather than merely improving sales or accomplishing some other vaguely stated purpose. Second, the likelihood of accomplishing the strategy can be weighed. That is, when all the programs aimed at one

specific strategy are added together, they should promise a good chance of reaching that strategic end result. Nonmarketing as well as marketing programs should be included in the body of a formal marketing plan. Even though the responsibility for carrying out the program lies outside the marketing department, it is useful and desirable to summarize in the marketing plan the major programs that will affect the marketing of the product. And here again success lies in selectivity and brevity. Failure to include the major nonmarketing programs affecting marketing profits or suc49

cess often leads to unnecessary confusion and sometimes to cross-purposes. When one product manager listed the research programs applying to his product lines, he discovered that the research department was spending most of its time on products that were of secondary importance in marketing. He called this to the research director's attention, and a change was made in the development program.

Organizing for Planning Organizing for comprehensive marketing planning is no easy job. However, certain organizational principles can help reduce wasted effort: Develop a schedule for completing each phase of the plan and stick to it. Formal planning must become a way of life in the marketing department, supported and carried out by each key marketing executive. The schedule should call for work on the plan for the next year to begin early enough in the current year to permit adequate time for market research and analysis of key data and trends. In addition, the schedule should provide for the early development of a strategic plan that can be approved or altered in principle. As discussed, the use of a strategic plan avoids wasting valuable time in developing finished programs that may not be acceptable to top marketing management because they do not achieve a desired sales or profit target or because they are not based on an approved strategy. h/lake formal provision for coordination among key planning groups during the plan5 0 I WINTER 1 9 7 0

ning process. Although the various planning groups may make their preliminary plans relatively independent of one another, formal contact among the key groups is essential before final plans are adopted. This formal contact coordinates the efforts of the various planning groups by: 1. Reducing duplication of effort 2. Providing an important means of exchanging information and ideas 3. Ensuring that the final plans of each group embody the thinking and programs of the various other planning groups. Make sure the company's information gathering and reporting systems supply the information needed to do comprehensive planning and to maintain adequate control. For planning purposes, it should be possible to determine in advance what kinds of information about the company, its products, industry trends, and other key trends will be needed each year. Many of these requirements can be built into the company's regular reporting system. This planning information will, of course, consist of nonfinancial as well as financial information. For example, data about the general economy, industry distribution trends, and company product acceptance may be required armually. These should then be collected systematically to avoid a last-minute rush. Control information should be concemed with reporting performance against plans. This concept of information reporting focuses attention where it should beon how well the company is carrying out its marketing plans. Regular reporting of performance against plan can also contribute to a gradual and steady

I improvement in the planning skills of execu! tives, for no one likes to see a low percentage of attainment reported for his department or product line.

Defining Responsibilities

One of the things that distinguishes a successful planner is his stress on assigning responsibility for developing and implementing plans. For example, a recent survey shows that many companies that have adopted the product manager concept have been disappointed; yet, in a number of leader companies this concept (including the development of first-rate marketing plans) is working very effectively. One of the key differences is that in the companies where the concept is effective, the product manager's responsibilities for planning are clearly defined. There are, unfortunately, no general rules or absolute guidelines that pertain in any given situation. For example, the range of responsibilities for product managers varies widely and properly soamong packaged goods, tire, and electronic companies. In packaged goods, the product manager generally controls a number of key fvmctions that govern his success (e.g., advertising, promotion, packaging). In tires, he must deal extensively with distribution channels, technical product development, and production. And in electronics, he often concerns himself primarily with functions outside his direct control (e.g., R&D, strategy and priorities, and developments in govemment contracting). Even within packaged goods

there are wide differences between the product manager's job in a dairy or snack company, for example, and his job with a soap or coffee producer. Similarly, in companies that do not employ the product management systemof ten industrial marketersthe successful planners have clearly defined responsibilities for each key phase of the planning cycle. It is also important to make sure that the inevitable conflicts between the marketing department and other functional departments (e.g., production, R&D,finance)are not buried too far down in the organization. In the real world, of course, the marketing plans of any company involve trade-offs between what the planners would like ideally and what is practical. For example, the marketing department may want to increase production rates sharply to carry out a sampling program in support of a product improvement. They may also feel that speed is crucial because the improvement can easily be matched by competition. Yet the production manager faces a different set of problems. He must hire and train a substantial number of new employees just for a short spurt of production. This makes it difficult for him to maintain his production efficiencies (on which his bonus is paid), and creates union problems when the workers are laid off. In many companies, especially where one department head is stronger than another, these conflicts of interest get resolved at quite low levels, often resulting in undesirable compromises or internally oriented decisions. Because of the completely different set of values involved, it is questionable whether top manage-

ment should expect, or really want, this type of issue to be settled among the departments themselves. Rather, the key to solving such a problem is to carry the philosophy of management by exception to an extreme, installing a process that brings every conflict of this sort right up the line to general management.

Top Management's Role

One of the chief shortcomings of many companies' marketing planning efforts is the inadequate role that top management plays in the approval of their plans. This problem can take two forms. At the one extreme, top management is "too busy" to study the plans in detail. Hence, its approval implies merely a vague endorsement that can be, and usually is, withdrawn at any time. This is naturally upsetting to the planners, but, more importantly, it is wasteful because the business will probably end up with two sets of plansthose developed by the plinners formally and the informal plans inflicted on the organization by an uninformed top management during the year. The other extreme, equally frustrating, is a top management that gets involved in every detail of the company's marketing programs and insists on approving or "signing off" on all ads, media schedules, promotion programs, package changes, and the like. Companies that have solved the problem of effective top management involvement in their marketing planning effort generally have done so by recognizing and organizing around two factors. First, they recognize top manage52 I WINTER 1 9 7 0

ment's fundamental responsibility for approving the strategic direction of each major business in which the company engages. Second, they have organized their planning processes so that top management approves each major product's basic strategy and the supporting facts that underly each strategy. Once these are approved by top managementgenerally as part of the annual planning cyclemarketing management (and other departments) is free to develop and execute specific programs designed to implement the approved strategies. Top management need only take action if actual results fall short of planned objectives and the explanations and revised proposals of the marketing planning group are imsatisfactory. Clearly, it takes more than soimd plans to make formal marketing planning work. Once plans are developed, carrying them out must become a way of life in the marketing organization. Once established, strategies and objectives will seldom be changed; programs,on the other hand, are revised whenever necessary to achieve the objectives. As plans are executed, performance must be measured against plans. When strategic goals are not attained, programs must be reevaluated. Barring ineffective execution, if planned programs do not achieve planned goals, the programs, not the goals, must be revised or supplemented. In this way, the productive effort of the marketing department is harnessed and directed toward chosen strategic goals; it is no longer necessary to settle for results achieved by programs that may well have been inadequate to begin with. Companies that utilize comprehensive mar-

keting planning consistently find that it yields at least these four major benefits: 1. Objectives are based on a specific, metrket-centered opportunity, not simply on management's desire to "do better." 2. Planning is focused on identifying specific, major opportunities and key strategic changes needed to capitalize on them, not on a rote examination of an exhaustive list of analyses. 3. Top management can devote its limited time to improving strategies and to quality control without getting bogged down unnecessarily in details. The reviewing executive can

see the basis on which the plans were made; he will not be dependent on verbal fill-ins that are characteristic of less rigorous forms of planning. 4. Integrated action is increased within the organization because planning responsibilities are clearly defined and the control process is geared to measuring how each department or unit performs in relation to its specific strategic goals and programs. Action is coordinated and directed toward a single set of strategic goals throughout the organization rather than being the by-product of each department's individual plans and activities. *

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