Malcolm McDonald on Marketing Planning
Understanding Marketing Plans and Strategy
Malcolm McDonald
Kogan Page, 2008
ISBN-13: 978 0 7494 5149 3, 192 pages
Theme of the Book
The essentials of marketing planning: a user’s guide, including tests to check
your understanding and to ascertain the current situation in your company.
To manage risk marketing plans must be relevant, realistic and useable; an
accurate portrayal of the market environment and a guide to the ‘unknown’,
allowing a company to include the inevitability of change in their marketing
strategy.
Strategic marketing capability requires:

A framework for marketing planning

Meaningful marketing intelligence

Action to implement the plans, including alignment of organisational
culture, structure and operations, driven by the CEO.
“The purpose of marketing planning is the identification and creation
of competitive advantage.”
Cranfield School of Management
Malcolm McDonald on Marketing Planning
Key Learning Points

Develop the strategic plan based on corporate objectives, this informs the
operational plan

Organise activities around customer groups and put marketing and sales
under one person

The marketing audit must be rigorous: invest appropriately in marketing
research for valuable intelligence and use marketing tools to analyse the
company’s competitive position

Collate the analysis into a SWOT by segment, focusing on the factors that
lead to objectives

Critically identify the objectives for each part of the marketing plan - Product,
Price, Promotion, Place - unique to that part and aligned with the overall
corporate and marketing objectives

Educate people about the planning process and ensure that marketing
planning is organised for the size and diversity of the company and
supported by the CEO
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Cranfield School of Management
Malcolm McDonald on Marketing Planning
Understanding marketing planning and its fit with corporate planning
The role of marketing is to identify what goods/services people want, so the
company produces for known demand. Increased market turbulence demands
that organisational structure is market/customer oriented and marketing planning
is inclusive. Market intelligence comes from all functions and feeds the strategic
marketing planning process.
First develop a long-term strategic marketing plan, determining the investment
plans for the company and then a short-term tactical marketing plan for
immediate activity.
“It’s not possible to plan marketing activities in isolation from other business
functions … the marketing planning process should be firmly based on
a corporate planning system.”
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Cranfield School of Management
Malcolm McDonald on Marketing Planning
Corporate planning provides a hierarchy of objectives and strategies:
S tep 1
Corpo rate
finan cia l
ob jectives
S tep 2
Mana gement audit
Corporate financial objectives
Marketi ng
audi t
Marketi ng
Distribution
a udit
S tocks &
control;
transpor t;
ware housing
O perations audit
V alue anal ysis;
con tinu ous
i mp rove me nt;
q uality control;
l abour; materi als;
p lant & space
u tili sation;
p roduction plans
Fina ncial a udit
Cred it; debt;
cash fl ow;
budgets;
reso urce
allocation;
cap ital
expe nditure;
long te rm
fina nce
Personnel Au dit
Ma nagement;
technical &
administra tive
cap ability; etc
S tep 3
O bjective
& str ateg y
settin g
Marketi ng
Obje ctives
strategi es
Distribution
O bjectives
strategies
Ope rations
Obj ectives
stra teg ies
Financial
Obj ectives
stra teg ies
P ersonnel
O bjecti ves
strategies
S tep 4
P lans
Marketi ng
Plan
Distribution
P lan
Ope rations
Pla n
Financial
Pla n
P ersonnel
P lan
Step 5
Corpora te
plans
Issue of corpo rate pla n, to i nclu de co rporate objective s and stra tegi es;
oper atio ns obj ectives an d strategies e tc; lon g-rang e pr ofit and loss
acco unts: b alance sh eets
Figure 1: Marketing Planning within the corporate planning process
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Malcolm McDonald on Marketing Planning
The strategic marketing planning process and the marketing plan
Figure 2: The 10 steps of the strategic marketing
The Strategic Plan
(output of the planning process)
Mission statement
Financial summary
Market overview
SWOT analysis
Assumptions
Marketing objectives and strategies
3-year forecast and budgets
1. Mission
Phase 1
Goal setting
2. Corporate objectives
3. Marketing audit
Phase 2
Situation review
4. SWOT analysis
5. Assumptions
6. Marketing objectives and strategies
Phase 3
Strategy formulation
Measurement
& review
7. Estimate expected results
8. Identify alternative plans and mixes
9. Budget
Phase 4
Resource allocation and monitoring
st
10. 1 year detailed implementation plan
The marketing audit is a systematic review of all external and internal factors
that affect the company’s performance. It covers business environment, market,
competition and internal operational variables. The data needs to be kept up-todate and the process systematised to maintain quality.
The results of the marketing audit are compiled into a SWOT analysis
highlighting factors that affect the company by market segment.
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Cranfield School of Management
Malcolm McDonald on Marketing Planning
1. SEGMENT
DESCRIPTION
It should be a specific
part of the business and
should be very important
to the organisation
2. CRITICAL
SUCCESS FACTORS
(CSF)
In other words, how
do customers choose?
3. WEIGHTING
(How important
is each of these
CSFs? Score
out of 100)
4. STRENGTHS / WEAKNESSES
ANALYSIS
How would your customers score you
and each of your main competitors out
of 10 on each of the CSFs?
You
1
2
1
3
2
4
3
5
Comp Comp Comp Comp
4
Total
5. OPPORTUNITIES / THREATS
What are the few things outside your direct
control that have had, and will have, an
impact on this part of your business?
THREATS
OPPORTUNITIES
5
6. KEY ISSUES THAT NEED
TO BE ADDRESSED
What are the really key issues from the
SWOT that need to be addressed?
1
2
3
4
5
Figure 3: Sample form for SWOT analysis
Defining markets and segments prior to planning
Market segmentation enables a company to target resources by what is bought,
who buys and why and to understand their position compared with relevant
competitors.
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Cranfield School of Management
Malcolm McDonald on Marketing Planning
Criteria for a viable marketing segment:
-
Size (achieves target ROI)
-
Similar requirements, yet different from others
-
Descriptors relevant to the purchasing situation
-
Reachable
A market map defines the value chain between supplier and end user and shows
the buying mechanisms, including the influencers. This helps identify decision
points where segmentation occurs and differentiate between customers and
consumers to show where you need a package of benefits that meets both
needs.
“A market is the aggregation of all the alternative goods or services capable of
satisfying the same customer need.”
Understanding products and services prior to planning
A product/service comprises the total customer experience when dealing with the
company and it is critical to understand the customer wants. The product has a
functional core and layers of surround, which are increasingly intangible. The
surround accounts for 80% of the impact, but only 20% cost.
Knowledge Interchange Book Summaries
Cranfield School of Management
Malcolm McDonald on Marketing Planning
quality
perceptions
during
sales
service
before
sales
service
Brand
name
intangibles
organisation
Figure 4
What is a product?
after
sales
service
function
PRODUCT
warranty
Reputation
services
design
packaging
price
value
perceptions
80% of the
impact, 20%
of the costs
features
advice
efficacy
Add-ons
availability
Corporate
image
other user
recommendations
Brand is of particular importance as it identifies a product and offers sustainable
advantage. Brand is about:

strategy – based on its position in the portfolio

positioning – what it does and what it competes with

personality – sensual, rational and emotional appeal
Successful brands generate significant value to the company, due to the
sustainable quality of relationships with customers. Neglect the brand and
products degenerate into commodities, with customers selecting on the core
functionality and price being the main factor.
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Cranfield School of Management
Malcolm McDonald on Marketing Planning
The Product Life Cycle (PLC) concept helps marketers forecast sales
patterns, both of the market or segment and their product within it.
Introduction
Growth
Maturity
Saturation
Decline
sales
Figure 5: Product Life Cycle
time
The ‘diffusion of innovation’ concept helps marketers focus their messages at
those most likely to adopt new technology. Conversion of these trendsetters and
opinion leaders convinces more conservative customers to purchase the product.
The product portfolio helps achieve corporate objectives by balancing sales
growth and profitability, cash flow and risk. Products should be at different
stages of the PLC. The Boston Matrix (Figure 6) suggests appropriate strategy
– selectively invest in ‘Question marks’; invest in and grow ‘Stars’; maintain ‘Cash
cows’ as they fund this growth; critically review ‘Dogs’ and dispose as
appropriate.
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Malcolm McDonald on Marketing Planning
Relative market share
(ratio of company share to share of largest competitor)
low
high
Star
high
Cash
gen erated +++
use
---
Question mark
Cash
gen erated +
use
---
0
Market growth
low
--
Cash cow
Dog
Cash
gen erated +++
use
-
Cash
gen erated +
use
-
++
0
Figure 6: The Boston Matrix
Other factors determine profitability and these are better analysed using the
Directional Policy Matrix: the axes are relative business strengths and market
attractiveness, indicating the relative importance of each market to the business.
Setting marketing objectives and strategies
This step uses all the information to make decisions about marketing direction
and delivery. The objectives define what the strategies are to achieve, given the
resources and capabilities. Objectives are concerned solely with products and
markets and must be specific, measurable and time-bound, eg sales
volume/value, profit, market share, penetration of outlets.
Marketing objectives cover the two main dimensions of growth: product
development and market development, the Ansoff Matrix supports this planning:
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Malcolm McDonald on Marketing Planning
Increasing
technological
newness present
Increasing
market
newness
present
PRODUCTS
new
Market
penetration
Product
development
Risk factor: 1
Risk factor: 2
Market
extension
Diversification
Risk factor: 4
Risk factor: 8
MARKETS
new
Figure 7: The Ansoff Matrix
New products infers technical innovation for the known desires of the existing
market, new markets means creating new relationships in an unfamiliar market
and diversification is the riskiest strategy as it takes the company furthest away
from its existing strengths and demands creating new relationships and
capabilities.
Marketing strategies are concerned with the four P’s of the marketing mix:

Product – mix, range, developments, design, packaging, branding,
positioning, etc

Price – price positioning by segment

Place – channels and customer service levels

Promotion – communication with customers /consumers by advertising, sales
force, sales promotion, public relations, exhibitions, direct mail, internet, etc
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Cranfield School of Management
Malcolm McDonald on Marketing Planning
The main components of the marketing strategy are Company,
Customers and Competitors; marketers must serve their customers in a way that
their rivals are not, in order to gain competitive advantage.
Porter’s generic strategies matrix identifies two dimensions of competition –
cost and differentiation. In a commodity market a company can lead only on
lowest cost. In a differentiated market, achieving low relative cost gives the
company market advantage and a high relative cost demands a niche marketing
strategy.
Advertising and sales promotion strategies
The Communications mix covers all the means of contact with customers, such
as advertising, sales promotions, PR, e-communications and sales force.
Advertising strategies:
The appropriate advertising objectives and strategies will depend on where the
product is in the life cycle and the diffusion of innovation status, eg new product
launches demand awareness building first, starting with innovators. Advertising
can also be directed at those who influence commercial success, such as
channels, employees, suppliers, shareholders, etc.
First define the objectives; the acid test is whether it is possible to achieve this
objective by advertising alone. Advertising objectives are mainly about changing
attitudes and creating awareness: they define who the company is seeking to
influence and what it is seeking to communicate. The advertising strategy flows
from this and answers questions around

Who - target audience,

What the company offers and wants to communicate with what response,
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Cranfield School of Management
Malcolm McDonald on Marketing Planning

How - creative strategy,

Where – what channels

When – schedules and reasoning

The results expected and how they are measured

Budget
Sales promotion strategies:
This ‘below the line’ expenditure is aimed at encouraging purchase and the offer
is made to customer groups in a specific time limit. It is usually a short-term tactic
for a particular objective such as trial, repeat purchase, counteracting competitive
activity, etc. The strategy ensures that this adds value to the brand and is
effective in achieving the marketing objectives over time.
Sales promotion falls into three categories:

Money – price reductions, coupons, competitions

Goods – free goods, trials, redeemable coupons, trade-ins

Services – guarantees, training, prizes for events, free services
Sales strategies
“Where sales act independently of marketing longer-term strategies often fail.”
The personal contact of selling greatly enhances service levels and helps close
sales, but at a high cost, so plan how personal selling is integrated into the
‘communications mix’ and how to organise logistics to ensure the desired results
are achieved cost-effectively.
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Malcolm McDonald on Marketing Planning
Factor in that salespeople fulfill multiple roles depending on the needs of the
customer. Optimising the size of the sales force will depend on the number of
existing customers by segment and the marketing plan for those segments.
Different segments will have different communication and service requirements
to factor into calculating the total demand on salespeople and therefore how
many are needed.
Establish quantifiable objectives, eg. volume; product mix; segment share;
allowable costs; profit margins. These are cascaded down to individual
representatives, taking into account the specifics of their customer base.
Qualitative objectives identify agreed standards of performance, such as work
quality, efficiency, style and behaviour.
Price strategies
“Price has an interactive effect on other elements of the marketing mix.”
Price is a critical element of the marketing mix and must take into account all
factors, especially the corporate and marketing objectives. The portfolio matrix
suggests pricing as follows:

Question mark – price competitively to gain market share

Star – price to maintain / increase market share

Cash cow – stabilise or raise price

Dog – raise price
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Cranfield School of Management
Malcolm McDonald on Marketing Planning
These strategies should correlate with the product life cycle, product
positioning and competitive rivalry. Price is a strong signal to customers of the
value of the offer. Ideally the company’s ‘offer’ should be unique in the market,
making price comparison difficult.
Potential competition should be taken into account, especially for new products:
a ‘skimming’ price strategy to recover costs can encourage competitors to enter
this profitable market, a ‘penetration’ price strategy may defer competition, but
demands quick product take up to build volume and income.
Cost must be part of the calculation: know what customers will pay for your
product/service and price accordingly, working on the cost options to keep
average cost per unit as low as possible. Consider the portfolio to ensure that
product prices complement each other and support corporate objectives.
Channel intermediaries profit requirements must be calculated to achieve the
desired price to the customer. Margins typically take the form of discounts
against price list:

Trade discount – for standard services

Quantity discount – to encourage volume

Promotional discount – support specific promotions

Cash discount – to encourage prompt payment
and must meet the marketing objectives and the financial policy and capital
structure of the company.
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Cranfield School of Management
Malcolm McDonald on Marketing Planning
Place (distribution and customer service) strategies
Consider the importance of distribution channels, the potential value of
intermediaries, and the role of customer service in the marketing mix.
The distribution mix comprises:

Facilities – location, size

Inventory – stocks to achieve service levels

Transport – mode, delivery schedules

Communications – flow of information, technology,

Unitisation – packaging units
Product availability and accessibility is core to marketing success and the choice of
1. selling direct
2. selling via intermediaries
3. combination of both
has significant impact on the costs and organisation of sales. Channel decisions
require a cost/benefit analysis in the context of the marketing strategy, also
considering the flow of payments (or transfer of ownership).
Customer service is the output of the distribution system and as is a key
determinant of competitive advantage, so decisions must reflect customer
expectations. The choice of service level should balance supplier costs and
customer benefits.
Distribution objectives will include: outlet penetration by type, inventory range
and level, distributor sales and sales promotion activity, customer development
activity.
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Cranfield School of Management
Malcolm McDonald on Marketing Planning
Information and organisation
A cost/benefit appraisal of sources of information ensures that investment in
research is well spent and delivers expected value.
Marketing research includes:

Internal – sales, advertising, price elasticity

External – market data, consumer data

Reactive – responses to surveys, interviews, focus groups

Non-reactive – interpretation of observations such as filming customer
behaviour in-store,
Any research programme starts with internal and published data before
commissioning specific research to provide the intelligence to convert uncertainty
to risk, which allows management to plan to minimise risk.
Managing marketing information to ensure it adds value avoids the collection of
data for its own sake. IT systems are essential and it’s important to design one
that works for the company as a whole, not just the marketing planners.
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Cranfield School of Management
Malcolm McDonald on Marketing Planning
Increasing diversity of customer needs and shortening product life cycles
make forecasting more difficult and less accurate. Marketers require macro
forecasts of markets and micro forecasts of their products/services. Both
quantitative techniques based on facts and statistics and qualitative techniques
using expert opinion and market research are needed.
“Marketing planning organisation must reflect the organisational evolution of the
company as it passes through characteristic life phases.”
Sales and marketing should be one person’s responsibility at Board level to
ensure co-ordination.
Making marketing planning work
Research shows the need for openness to external influences, integration into
other functions, coherence across corporate objectives and strategies,
leadership from the CEO, time to implement marketing planning effectively.
The Author
Malcolm McDonald is Emeritus Professor of Marketing at Cranfield University
School of Management and the author of over fifty books, including the best
seller "Marketing Plans; how to prepare them; how to use them" and many of his
papers have been published. Previously, Malcolm was Professor of Marketing
and Deputy Director Cranfield School of Management with special responsibility
for E-Business. He is Chairman of six companies and spends much of his time
working with the operating boards of the world’s biggest multinational companies.
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