Lecture 2: Dynamics of Marketing Environment and Marketing Planning

MGT 252 Winter 2007 Maggie Wenjing Liu

Todays Agenda
In-class debate: Demographic or Technology? Environmental factors that influence marketing activities Developing a marketing plan (term project)

Class Debate
Which environmental factor is the most important for marketing: demographic change or technology change? What forces have influence on companys marketing? How much influence? How to react to the influence?

Demographic Change
Know who are going to buy your product most obvious change is the aging population; impact of seniors, boomers and their kids smaller families; more single-person households smaller, non-traditional households more part-time workers, dual-income households changing patterns of immigration; ethnic mix

Technology
Consumers tech skills, your own tech level. launches entirely new industries, such as multimedia, digital communications and electronic commerce alters or virtually destroys existing industries, such as the effect of e-mail on regular mail and even fax stimulates other markets and industries, such as the effect of the debit card and Internet shopping on the retailing industry

The External Environment

macro forces are factors over which the company has no short-term control micro forces operate at the firm level the external macroenvironment affects different firms in different ways the better we understand the changing marketing environment and its effects, the better we can develop effective marketing programs

Figure 2-1 Relationship-Insensitive External Environmental Forces

Economic Conditions
How many people can afford your product How will consumers react to each of the following economic factors? Recession/Boom Inflation Interest Rates Unemployment Rates

Marketing Environment

Competition
Whos your competitor, what are they doing? competition takes place at three levels: directly at the brand or store level at the level of substitute products/services other demands upon our buying power Could be from international (e.g. outsourcing).

Social and Cultural Forces

Lifestyles, values and beliefs greater emphasis on quality of life immigration brings changing values rapidly changing gender roles different attitudes toward physical activity, exercise, and diet among certain segments increased emphasis on service quality and value

Identifying green customers

True-Blue Greens Will change their behaviour and purchases in order to aid the environment. Greenback Greens Not as willing to change as much of their actual behaviour, but will support causes and candidates who support the cause. Sprouts Make some environmental efforts and purchases. Grousers Grudgingly acknowledge environmental mandates Basic Browns Most apathetic

Political and Legal Forces

Are your products and marketing methods legal? government and laws affect marketing at many levels legislation often has implications for marketing; some more direct than others many industries are directly affected by legislation; packaging, labeling, advertising

Controllable Environmental Forces

external to the firm, but part of its marketing system because of its close relationship these can be influenced by the firm to greater or lesser degrees; they are not entirely uncontrollable these forces may be considered relationshipsensitive, as it is of considerable importance for the firm to establish solid relationships with these partners in its success

Figure 2-2 Relationship-Sensitive External Environmental Forces

The Market Environment

the environment in which the firm operates; but more than customers its market; the people or organizations whose wants and needs the firm intends to satisfy its customers or consumers its suppliers; the other firms upon whom the firm relies to provide quality products and services so that it can serve its customers marketing intermediaries; other firms that represent the channel of distribution for the firms products and services

Internal Environmental Forces

internal factors influence the firms marketing strategies, programs and activities, and have the potential to affect customer satisfaction R&D Production facilities Financial Human resources Location

Developing a Marketing Plan

Product vs. Marketing Orientation Starting

Point Factory Focus Means Product Orientation Quality Cost Ends Mass production Profits through Sales Volume Mass selling

Marketing Orientation Target Market Customer Needs

Integrated Profits through Marketing Customer Satisfaction

What is Marketing?

Defining the Organizational Mission

PRODUCT-ORIENTED MARKET-ORIENTED VISION/MISSION VISION/MISSION STATEMENTS STATEMENTS We make cosmetics. We sell lifestyle and self expression; success and status; memories, hopes and dreams. We provide fantasies and entertainment -- a place where America still works the way it is supposed to. We offer products and services that deliver value to middle Americans.

COMPANY Revlon

Disney

We run theme parks.

Wal-Mart

We run discount stores.

Marketers tasks in planning

Look for Opportunities
Consumer Competition Company (Uncontrollable 3Cs) Segmenting Targeting Positioning (STP)

Implement Positioning
Product Price Promotion Place (Controllable 4Ps)

The Management Process

PLANNING Analyze situation (3 Cs) Set goals (STP) Select strategies and tactics (4 Ps) IMPLEMENTATION Organize Staff Direct EVALUATION Compare performance with goals

Feedback, so management can adapt future plans and their implementation to the changing environment

Strategic Company Planning

Key Planning Concepts

1. 2.

3.

4.

Mission: The statement that indicates the boundaries of an organizations activities. Objective: A desired outcome. Should be clear, specific, stated in writing, ambitious, realistic, consistent, measurable, and tied to a particular period. Strategy: A broad plan of action by which an organization intends to reach its objective(s). Tactic: A means by which a strategy is implemented. They generally cover a shorter time period than strategies.

Types of Planning
Strategic Company Planning
Define mission Set long-range goals

Strategic Marketing Planning

Goals and strategies for the marketing effort

Annual Marketing Planning

Short-term plans describing marketing functions IMPLEMENTATION AND EVALUATION

Strategic Company Planning

1. 2.

1. 2.

Define the organizational mission. Analyze the situation. Situation Analysis: get information about the company & its business environment from accessible sources, e.g. library, employees. Set organizations objectives. Select strategies to achieve these objectives.

McDonalds Canada
1. 2.

3.

4.

Mission: To provide cheap, tasty food quickly to our customers. Objective: To recapture the #1 position in Canadian restaurant revenue from Tim Hortons. Strategies: (a) Improve product selection to have healthy alternatives. (b) Increase the number of restaurants. Tactics: (a) Develop a line of soups. (b) Open up restaurants in non-conventional locations such as subway stations.

Analyzing SBU Situation

Strategic Business Units: smaller planning units within a larger company. Be a separately identifiable business. Have a distinct mission Have its own competitors. Have its own executive group with profit responsibility. Have its own strategic plan.

BCG Growth Share Matrix

Companys Market Share High Low

Industry Growth Rate

High Stars Question marks

Low

Cash cows

Dogs

Product Market Growth Matrix

PRESENT PRODUCTS NEW PRODUCTS PRESENT MARKETS Market penetration Product development

NEW MARKETS

Market development

Diversification

The product-market growth matrix depicts the options available in considering markets and products.

Strategic Marketing Planning

Conduct situation analysis. Environmental scan and SWOT (Strengths, Weaknesses, Opportunities and Threats.) Develop marketing objectives. Determine positioning & differential advantage Select target markets and measure market demand. Design a strategic marketing mix.

Recall: Marketers tasks

Look for Opportunities
Consumer Competition Company (Uncontrollable 3Cs)
1. Situation analysis 2. Develop marketing objectives

Implement Positioning
Segmenting Targeting Positioning (STP)
3. Determine positioning & differential advantage 4. Select target markets & measure market demand

Product Price Promotion Place (Controllable 4Ps)

5. Design the strategic marketing mix

Imagine we work for:

WestJet Facts
Canadas #2 airline at 7% market share of passenger miles. Air Canada has 80%. Serve 22 Canadian cities. Airplanes were 80.3% full in July 2002 compared to 82.6% in July 2001. Operating revenue is $300 million JanJune 2002. Up 47% from year earlier. Only fly domestically. Profitable. Lower costs than Air Canada.

1. Situation Analysis
SWOT assessment: Strengths, Weaknesses, Opportunities, Threats WestJet: Strengths Weaknesses Opportunities Threats

2. Marketing Objectives
Determine a marketing goal. WestJet: 10% 50% 10% 20% customer? share? increase in revenue? decrease in marketing costs? rise in revenue per

3. Positioning & Differential Advantage

Positioning refers to a products image in relation to directly competitive products. Differential Advantage refers to any feature of an organization or brand perceived by customers to be desirable and different from those of the competition. WestJet?

4. Target Markets & Market Demand

Target Markets: Segment your customers, and develop strategies for each segment. Market Demand: How many customers in total? How many for your company? WestJet?

5. Marketing Mix
Price (base, coupons, discounts, etc.) Product (or service) Promotion (marketing communications) Placement (Distribution) Plus customer service. WestJet?

Annual Marketing Planning

1. 2. 3. 4. 5. 6. 7. 8.

Executive Summary (one page) Situation Analysis (two to three pages) STP, Objectives Strategies Tactics Financial Schedule Timetable Evaluation Procedures (one page)

Example Case: McDonalds

1. Executive Summary
Intended for executives who need an overview, but wont be doing the nittygritty. Summarize the next seven sections.

McDonalds The #1 fast food chain in the world. Growth slowing in core product.

2. Situation Analysis
Analyze past, present, and future conditions based on easily accessible sources. SWOT Describe human resource constraints. Much of this section is in the Strategic Marketing Plan. McDonalds #1 fast food chain in the world, but slipping. Competition: local and healthier alternatives. Restaurants in 120 countries. Demand for beef worldwide falling due to Mad Cow.

3. Objectives

Specific Annual Objectives: this factor increase by x% over y months. Explain why these are good objectives.

McDonalds 1. Increase worldwide fast food market share by 5%. 2. Maintain worldwide restaurant market share. 3. Maintain per-store sales while expanding. 4. Increase profits 10%.

4. Strategies
Price, product, promotion, and placement ideas for each target market. McDonalds Product: New healthy alternativesLikely hurts short run profits. Price: Maintain low prices with daily specials. Promotion: Use sweepstakes and advertising to encourage consumption of health alternatives. Placement: Expand into areas that do not cannibalize current sales. Should help profits and maintain per-store sales.

5. Tactics
Specific action plans for each strategy. Who, how, and when. McDonalds Product: Add salads and soups to menu. Buy healthier chains and expand them (Boston Market). Price: Keep current prices the same. Price healthy alternatives at a slight premium. Promotion: Give extra Monopoly pieces to people who try the healthy alternatives. Advertise new chains heavily. Placement: Open more Boston Markets and Chipotle Grills and fewer McDonalds.

6. Financial Schedules

Projected sales, expenses, and profits

McDonalds Annual Revenue Existing McDonalds Restaurants: New McDonalds Restaurants: Existing Other Restaurants: New Other Restaurants: Annual Costs Administrative Costs Marketing Costs Other Costs Annual Profit

$14 billion $200 million $500 million $100 million $10 billion $2 billion $1.1 billion $1.7 billion

6. Financial Schedules

In your project, these will obviously be fiction. But educated fiction. Do some research with annual reports (available on any companys website) to get a big picture. Get stats to find market size. Guess market share for your product. Choose price. This gives revenue (or sales). Guess expenses (variable and fixed). Then you have profits too (revenue minus costs). Dont worry about accounting format unless you want

7. Timetable
Calendar with when things get done. McDonalds:

Jan

Feb

Mar

Apr

Salads on menu
May

Core restaurant ad Monopoly campaign Promotion

June July Aug

Open 5 new Soups on menu Open 2 new Boston Market McDonalds stores
Sept

Boston Market ad campaign

Dec

Bring Chipotle to Canada

Oct

Nov

Open 2 new Chipotles

8. Evaluation Procedures
How to evaluate success? How to compare performance to goals? Evaluate periodically throughout the year.

McDonalds What is final market share? Were sales cannibalized? Measure by change in same-store sales in those near new restaurants versus others. Did profits rise?

Term Project
Not point form, but in short, to-the-point, sections and paragraphs. It does matter that you can write clearly and effectively. Choose your group and your topic soon. See me before starting the final project. Choose any product/service you want, and be creative. But keep in mind that both creativity and marketability matter. You need concrete evidence and details.

Term Project
Use outside sources for secondary market research and for ideas Quote all sources except the text and lectures. Use the ideas from the text and lectures though!

Good sources include:

The Wall Street Journal, The Globe and Mail and other newspapers Business Week and other magazines Statistics Canada Harvard Business Review Sloan Management Review Library books on marketing or your product Financial Post. Canadian Demographics 2002 Canadian Media Directors Council. Media Digest 2001-2002 Many, many, many others

Summary
Marketing needs to be carefully planned and managed. This takes place on three levels Strategic Company Planning Strategic Marketing Planning Annual Marketing Planning

Next Class: Chapter 3+4

Understanding the Customer Segmentation and Positioning Case Analysis: Case 2-1 and questions p187 (relevant to Chapter 4)