University of Michigan Business School



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Framework For Marketing Planning

Gene Anderson (distributed March 2005)

This note outlines the basic steps in the marketing planning process and provides detailed guidance for conducting a Situation Analysis. The stages of the marketing planning process can be listed as follows:

I. Situation Analysis (5C’s)

A. External

1. Customer Analysis

2. Competitor/Collaborator Analysis

3. Context or PEST Analysis

B. Internal (Company)

1. The Organization’s Goals and Objectives

2. The Organization’s Strengths and Weaknesses

C. Identify Key Problems & Opportunities

1. Perform SWOT Analysis

2. Set Priorities

3. Develop an Overall Assessment

II. Segmentation, Targeting, and Positioning (STP)

A. Identify Relevant Markets and Segments

B. Select Target Markets and Target Segments

C. Develop Positioning Strategy

III. Determine Marketing Mix Alternatives

A. Product (Goods and/or Services)

B. Price

C. Place (Distribution)

D. Promotion (Advertising and Promotion)

E. Evaluation of Alternatives

IV. Execution

A. Implement

B. Monitor

C. Control

D. Adapt

The first stage, the Situation Analysis, combines internal analysis of the organization with external analysis of its customers and the competitive environment. The fundamental questions to be answered include: What are target buyers needs?; What do we do well?; and What are competitors doing to serve those needs? Careful analysis of the firm’s situation - past, current, and future - provides a foundation for determining how the firm’s resources can best be deployed in terms of marketing strategy and tactics.

The purpose of the Problems and Opportunities stage is to distill what has been learned from the situation analysis. The result should be a limited set of key factors that play a role in the decision-at-hand. To gain a better understanding of the firm’s situation, it is useful to prioritize the factors identified. A useful approach to doing so is to provide an argument for whether the overall situation is favorable or unfavorable.

After analyzing the firm’s situation and identifying the key problems and opportunities faced by the firm, the information for creating an appropriate marketing strategy is in place. By analyzing the organization, its customers and the competitive environment, there is an increased likelihood of developing superior marketing strategy and tactics. By understanding what the organization does well, what customers need, and what competitors are doing - both now and in the future - managers can create the best possible match between organizational skills and market needs - and to do it better than the competition.

Once the Situation Analysis is complete and the key problems and opportunities have been identified, the value proposition - what value to offer and to whom - can be developed. Given what has been learned in the Situation Analysis, the fundamental activities in determining the value proposition are: 1) understand the needs of buyers in possible target markets; 2) identify segments of buyers with similar needs and/or responsiveness to marketing strategy and tactics; 3) select one or more segments of buyers to target; and 4) develop an appropriate positioning strategy.

In conjunction with the development of the value proposition, the means of value delivery - how the organization will deliver on a given value proposition - must also be determined. It is generally recommended that you develop several alternative sets of marketing strategy and marketing mix tactics and then evaluate each one from both a qualitative and quantitative standpoint.

Finally, select one of the alternative plans as the recommended course of action. Careful attention should be paid to how the plan will be implemented, how progress will be measured and evaluated, and how the plan might be adapted over time.

The Situation Analysis

In many business situations, decision-makers are confronted with large amounts of data - a considerable proportion of which is unimportant, irrelevant, or redundant, in terms of addressing the decision-at-hand.  The goal of a Situation Analysis is to improve the signal-to-noise ratio by reducing the data to a finite number of Problems and Opportunities that should be considered in arriving at a final judgment.

The Situation Analysis provides an organizing framework -- the 5C's of Company, Customers, Collaborators, Competitors, and Context -- for guiding the process of identifying the set of issues that are 'material' to the decision-at-hand.  The 5C's framework ensures that important issues in each domain are identified and, subsequently, that judgments are more reasonable and better supported than would be typical using a more ad hoc approach to 'cracking' the case.

In using the Situation Analysis approach, keep in mind that the objective is to identify only those issues that are 'material' to addressing the problem or opportunity at hand.  Hence, not all areas of the Situation Analysis will need to be considered for every marketing decision encountered.  In some cases, competition may not be an important factor.  In other situations, the legal or political environment may be irrelevant for the decision.  In this regard, it is always a good practice to ask 'What is the implication for the marketing decision I am trying to make?'

In essence, the Situation Analysis framework should be viewed as a 'roadmap' or 'checklist' for marketing decision-making.  Without such a checklist, a decision-maker might easily fail to consider important issues that would affect their final recommendations.

 

Overview of the Situation Analysis Framework

The basic elements of the Situation Analysis are illustrated below.  As suggested by the diagram, the firm's marketing strategy and marketing mix should create a strong 'fit' between the organization and each of the external forces affecting it.  In assessing the overall situation, it is often useful to categorize each relationship as either favorable or unfavorable.  A strong organization is one that enjoys a favorable position with respect to each of the external forces -- Customers, Collaborators, Competitors, and Context. 

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Customers

The purpose of the Customer Analysis stage is to make explicit what you know about the nature of consumer or customer demand for the product or service under investigation.  In particular, we want to learn:

▪ How decisions are made

▪ Who is involved in making the decision

▪ What information is used

▪ The trade-offs they are willing to make

▪ Where & when they are ready to buy

▪ How the product or service is used

Key areas of analysis to consider include:

Market Segmentation

▪ What segments can be identified?

▪ What is their size, growth & potential?

Decision Making Unit (DMU)

▪ Who is involved?

▪ Who has power? Who has stake?

▪ How great is bargaining power?

▪ What information sources are used and how?

Decision Making Process (DMP)

▪ How/when/where do buyers search, decide, purchase, transport, store, use, maintain, dispose, re-buy, etc

▪ What drives perceived value?

▪ What are customer acquisition & retention characteristics?

       

Competitors

For long-run success, marketing strategy and tactics must take into account likely competitive moves & counter-moves. Afterall, what we do affects what they do which affects what we do … and so on. So, our strategy and tactics needs to take all players’ subsequent moves into account.

The main goal of competitor analysis is to analyze the nature and extent of the competition - both current and potential.  Key areas of analysis include:

Identification

▪ Market definition

o Who competes to provide the same benefits?

o Who competes for the same customer resources (money, time, etc)?

▪ Direct competitors

▪ Indirect competitors and substitutes

▪ Potential competitors and entrants

Assessment

▪ What are the competitors’ positions?

o Goals

o Strategy

o Tactics

o Resources

o Implementation

o Performance

▪ Who Is Successful Or Unsuccessful?  Why?

Prediction

▪ Anticipate future moves

▪ Predict expected reactions to our moves

Potential sources of information about competitors and collaborators are listed in Table 1 towards the end of this document.

Collaborators

Increasingly, competition is between networks, rather than individual organizations.  Key issues to consider regarding collaborators include:

Value Chain Position

▪ What is their position in the value chain?

▪ What functions/activities do they perform?

Complementary Capabilities

▪ Who has capabilities that we need?

▪ Who would benefit from capabilities that we possess?

Compatibility

▪ Are our goals compatible?

▪ Can we trust this partner?

Commitment

▪ What level of commitment is required?

▪ What structure & systems are needed?

▪ What do we need to know/learn?

Context

           

The main purpose of analyzing the business environment is to understand the dynamics of the market place and what they imply for the decision at hand:

PEST Analysis

▪ What are the most important PEST factors affecting our business?

o Political/Legal – e.g., NAFTA, WTO, Deregulation

o Economic/Ecological – e.g., Capital and Labor Markets, Asian ‘Flu’, Inflation, Interest Rates, Resource Sustainability

o Social/Cultural – e.g., Multi-Culturism, Global Diversity

o Technological – e.g., ‘Shadow of Obsolescence’, internet diffusion, life sciences

▪ How favorable are each of the above factors?

Competitive Forces Analysis

▪ How favorable are the relevant competitive forces?

o Bargaining power of suppliers

o Bargaining power of buyers

o Bargaining power of collaborators

o Bargaining power of investors

▪ What is the degree of competitive rivalry?

Scenario Analysis

▪ Which PEST and competitive forces factors are most likely to change?

▪ What are the most likely future scenarios?

▪ Which scenarios are the most favorable?  The least?

Company

         

We analyze the organization's objectives, strategy, and capabilities, in order to evaluate the strength of the current business model and to identify areas for improvement and/or change.  Importantly, we want to understand the implications of how well the organization fits with the critical parts of the external environment identified in our analysis of the customers, collaborators, competitors, and the PEST.

Important areas of analysis include:

Goals and Objectives

▪ What business is the firm in?  What business should it be in?

▪ Who are the key stakeholders?  What are their needs?  What is the relative priority of these needs?

▪ What is the organization’s stated mission?

▪ What are the stated goals and objectives for achieving the firm’s mission and/or satisfying stakeholders?

▪ Are these goals measurable?  Actionable?  Reasonable?

▪ Are supra-ordinate goals properly linked to subordinate ones?

Position

▪ Marketing Strategy

o Target segment

o Positioning

▪ Marketing Mix

o Product/Service

o Place

o Promotion

o Pricing

▪ Resources

▪ Implementation

Performance

▪ What metrics is the organization using to gauge performance?

o Effectiveness

o Efficiency

o Supra-ordinate

o Subordinate

▪ How effectively is the organization performing with respect to its stated goals?

▪ How efficiently is the organization achieving this level of performance?

TABLE 1

Sources of Information About Competitors

| |What competitors say about themselves |What others say about them |

|Public |Advertising |Books |

| |Promotional materials |Articles |

| |Press releases |Case studies |

| |Speeches |Consultants |

| |Books |Newspaper reporters |

| |Articles |Environmental groups |

| |Personnel changes |Consumer groups |

| |Want ads |Unions |

| |Customer communications |Recruiting firms |

|Trade Profession |Manuals |Suppliers/vendors |

| |Technical papers |Trade press |

| |Licenses |Industry study |

| |Patents |Customers |

| |Courses |Subcontractors |

| |Seminars |Consultants |

|Government |Security and Exchange Commission reports |Lawsuits |

| |FTC filings |Antitrust |

| |Applications and permit filings |State and federal agencies |

| |Patent filings |National plans |

| | |Government programs |

|Investors |Annual meetings |Security analyst reports |

| |Annual reports |Industry studies |

| |Prospectuses |Credit reports |

| |Stock and bond issues | |

 

       

 

 

Customer Analysis Worksheet

What Are the Relevant Segments?

What Are Their Needs, Perceptions, and Behaviors?

Competitor Analysis Worksheet

What Is the Relative Strength of Competitors’ Positions –

Both Now and In the Future?

Context Analysis Worksheet

How Favorable Is the Market Context? Why?

Company Analysis Worksheet

How Favorable Is the Fit Between the Company and

Customers, Competitors, and the PEST?

SWOT Analysis Worksheet

Is the Overall Situation Favorable or Unfavorable? Why?

|Strength, Weakness, |Importance |Favorability |

|Opportunity, or Threat |(e.g., Allocate 100pts) |(e.g., 1=Low, 5=High) |

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|Overall Favorability | | |

|(Weighted Average) | | |

Generation of Alternatives Worksheet

For Each Possible Target Market Alternative, What Is Our Best

Marketing Strategy Given Market Forces (Especially SWOT)?

Evaluation of Alternatives Worksheet

For Each Possible Alternative Marketing Program, How Favorable

Is the Fit With Market Forces (Especially SWOT)?

BIBLIOGRAPHY

Bernhardt, Kenneth L. and Thomas C. Kinnear (1991), Cases In Marketing Management, 5th edition, Boston, MA: Irwin.

Kotler, Philip (1999), Marketing Management: Analysis, Planning, Implementation, and Control, 10th edition, Englewood Cliffs, NJ: Prentice-Hall.

Kotler, Philip, William Gregor and William Rogers (1977), “The Marketing Audit Comes of Age,” Sloan Management Review, 18:2, 25-43.

Lilien, Gary, Philip Kotler and Sridhar Moorthy (1992), Marketing Models, Englewood Cliffs, NJ: Prentice-Hall.

Lehmann, Donald R. and Russell S. Winer (1994), Analysis for Marketing Planning, 3rd edition, Englewood Cliffs, NJ: Prentice-Hall.

Nayak, P. Ranganath, Erica Drazen, and George Kastner (1992), “The High-Performance Business: Accelerating Performance Improvement,” Prism, 1st Quarter 1992, p. 1-20.

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Segment 1

Segment 2

Segment 3

Segment 4

DMU (Decision Making Unit)

DMP (Decision Making Process)

Perceived Value Drivers

Acquisition & Retention

Size, Growth & Potential

Competitor A

Competitor B

Our Company

Direct, Indirect or Potential?

Performance

Success Factors

Goals & Objectives

Strategies & Tactics

Strengths & Weaknesses

Anticipated Moves/Reactions

Technological Environment

Supplier Power

Threat of Entry

Capital

Complements

Overall Favorability

Favorability (e.g., 1=Low, 5=High)

Fit w/ Customers

Fit w/ Competitors

Fit w/

Context

Goals & Objectives

Performance

Success Factors

Strategy & Tactics

Capabilities

Organization

Implementation

Importance (e.g., Allocate 100pts)

Implications

Political/Legal Environment

Economic/Ecological Environment

Social/Demographic Environment

Importance

(e.g., Allocate 100pts)

Alternative I

Alternative II

Fit w/ Customers

Fit w/ Company

Fit w/ Customers

Fit w/ Context

Objective

Target Segment(s)

Positioning

Product

Place

Promotion

Price

Fit w/ Competition

Fit w/ Competition

Fit w/ Context

Fit w/ Company

Overall

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