CHAPTER 11
Planning and Budgeting the
Marketing Mix
Part 1: Pages 287 - 295
Introduction
The introductory material presented a
case study of sorts explaining how an
organization, population services
international (PSI), analyzed statistical
databases and used the results of this
analysis to direct their decision-making
processes
Core Marketing Strategy
Six areas a marketing manager must analyze
when developing the organization’s core
marketing strategy:
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Target customers
Probable changes in future environment
Potential competition
Organizational strength and weaknesses
Organizational structure
Organizational resources
Decision-making
In order to properly analyze these critical
areas, the manager must depend upon
planning and budgeting tools.
There are two types of decisions that a
manager will have to make: structural and
programmatic.
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While structural support is critical to programmatic
activities, the information in this chapter is
primarily devoted to the programmatic vice the
structural.
Measuring Current Market Demand
Planning should properly start with
determining what the current market is for
whatever the organization has to offer be it
products, services, or opportunities to change
behavior.
To do this the organization has three types of
estimates they can conduct:
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Total market demand
Total industry demand
Organization market share
Program Budgeting
Before developing program budgets, the
manager must have a fundamental
understanding of where the organization
stands in regard to the following issues:
Size of current market demand
 Forecasts for future demand
 Internal competition with other programs
 Overall budget allocation for marketing
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Estimating Total Market Demand
Total market demand is defined by Andreason
and Kotler (pg 289) as:
“…the total volume of exchanges with all
marketers that would be made by a defined
consumer group in a defined geographical
area in a defined time period in a defined
marketing environment under a set of defined
marketing programs.”
Market Demand
The authors are careful to point out that the total market demand
is not a fixed number but is rather a function of a number of
conditions and their inter-relationships.
The altering of one condition can be expected to stimulate
change in one or more other conditions.
The two graphs featured in Figure 11-1 on page 290
demonstrate the relationships between marketing efforts (as
expenditures) on the horizontal axis and market demand on the
vertical axis under varying conditions such as time and
economic environment. The curvilinear results of these
functional relationships provide graphic representations what the
expected market minimums and maximums are and helps the
market analyst predict what level of demand might be expected
as a result of a certain level of “effort.”
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The distance between the market minimum and the market
maximum is the marketing sensitivity of demand, the area where
the marketer can target marketing resources in an effort to increase
market share.
Market Demand (Cont)
The marketing sensitivity of demand can also be
thought of as a margin between a low end, where the
market is at its minimum, and a high end, where the
market is near its potential. This is also called the
market.
Now consider that this market margin could be either
expansible or non-expansible; that is, fixed or
capable of growth. This is an important consideration
for the marketing manager because;
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If the market is fixed (non-expansible), the organization must
concentrate its resources on increasing its share of the
market
If the market is expansible, the organization must
concentrate resources on not only increasing its share of the
market, but also on growing the overall size, or margin, of
the market.
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It may even benefit the organization to team with other entities
in the same market area to grow the entire market.
Market Demand Forecast
Despite the many possible outcomes of market
behavior in response to marketing expenditures, only
one outcome will turn out to be the case. This is
called the market forecast.
Whenever any of the environmental conditions
change, it can be assumed that the market demands
will change too and so a new market demand
function would need to be estimated.
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The marketer must be careful to define the situation for
which the market demand is being estimated.
The marketer can use the chain ratio method by which a
base number can be multiplied by a succession of
percentage leading to an estimated level of demand.
Estimating Current Total Industry
Demand
Another approach to estimating demand.
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Calls for compiling aggregate sales volume,
donations, numbers of volunteers, etc. for all an
organizations market competitors
Information can be gathered in different ways:
government mandated reporting, organization Web
sites, even asking the other organizations for the
information
The resultant data can be used to do comparative
analysis to determine (a) the overall size of the
market, and (b) their share of that market.
Forecasting Future Market Demand
Total market demand and specific
organization demand are not stable from one
year to the next.
Poor forecasting can lead to excess or
insufficient personnel and supplies.
The more unstable the demand, the more
critical forecast accuracy becomes and,
hence, the more elaborate the forecasting
procedures become.
Forecasting Procedures
Any forecasting procedure should take in to
consideration the following factors that affect
future demand:
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Non-controllable macro-environmental factors
(economy, technology, the law, for example)
Competitive factors (competitors’ products and
pricing, for example)
Controllable organizational factors (products,
pricing, marketing expenditures, for example)
Forecasting Procedures
There are three main information sources (or
bases) analysts use for building forecasts:
what people do, what people say, and what
people have done.
There are five primary methods by which
researchers gather this information:
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Target Intention Surveys
Expert Forecasts
Market Tests
Time-Series Analysis
Statistical Demand Analysis
Target Intention Surveys
A sampling of members of the target market either
individually or in focus groups to determine their
intention regarding the product, service or behavior.
Reliability depends upon:
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The individual having clear intentions
The individual is likely to carry out that intended behavior
The individuals are willing to describe their intentions (and
be honest about them)
How much time elapses between the statement of intention
and the actual behavior
Expert Forecasts
Basically entails asking experts to make
predictions.
Especially suited for long-term forecasting
where surveys and focus groups may lack
perspective, experience and wisdom.
Might consist of:
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Contracting with a “think tank”
Conducting “scenario analysis” where past and
present developments are projected into one or
more future paths, then use probability estimates
to select the most likely future.
Using the Delphi Method, which uses a forecast –
feedback – reforecast methodology.
Market Tests
Usually highly accurate and reliable when
conducted on a small-scale
Time – Series Analysis
Based on statistical analysis of past data
looking for causal relationships.
Four major components:
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Trend – basic level and rate of change
Cycle – up and down trends over time
Season – any consistent pattern of movement
within the year
Erratic events – also called “acts of God”
Statistical Demand Analysis
A set of statistical procedures designed to
reveal the most important factors affecting
behaviors and determining their relative
influence.
The factors most commonly analyzed are:
economic conditions, household composition
and income, population, and promotion.
Expresses relevant behaviors as dependant
variables and tries to explain variations as a
result of variations in one or more
independent variables.