Market planning and strategy

Learning intentions
By the end of this topic students should be able to:
 demonstrate and apply knowledge and understanding of a marketing plan including product
development (new and existing), SWOT analysis, market research, market positioning, business
objectives, marketing strategies and a marketing budget;
 demonstrate and apply knowledge and understanding of market segmentation;
 analyse how markets might be segmented;
 evaluate issues relating to market planning and strategy such as the usefulness of a marketing
plan, or the need to segment a market.

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Business Planning
Business planning is the process through which organisations attempt to anticipate the future and
devise courses of action that will help them achieve their corporate objectives. An effective business
plan is an essential component of any successful business, since it helps firms focus on the important
tasks and provides a mechanism for assessing progress towards meeting key objectives.
An effective business plan will be made up of a range of smaller plans for each of the functional areas of
the business.

Business Planning
o Marketing plan o Production plan
o Financial plan o Admin plan
o Human Resource plan o ICT plan

While each of these individual plans will have their own specific objectives and strategies they will all
interact to produce a coherent plan for the overall business.
Marketing Plan
The Marketing plan is one of the most important components of the overall business plan and is simply
a written document which details the actions which are required to ensure the business meets its
marketing objectives. It is a summary of the marketing activities which a business might undertake in
order to achieve its business objectives. In the context of a rapidly changing environment and with the
marketing tools available, the marketing plan tends to succinct in nature, covering a period of 1 year and
includes the following sections.
 Introduction  SWOT analysis  Business objectives
 Key Objectives  Market Research  Marketing strategy
 Product development  Market positioning  Marketing budget.

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Introduction: summarises current/past marketing performance and key marketing activities and
outlines future plans

Key marketing objectives: specific key objectives for the marketing function are the goals or targets
that the business intends to achieve in order to facilitate the overall objectives of the business that have
been set out in the business Mission Statement by senior management. Marketing objectives could
include:
1. Maintaining existing market share.
2. Increasing sales revenue.
2. Market Growth that is, increasing existing market share.
3. Growing and maintaining a prestigious business image.
4. Growing and maintaining a prestigious product or service image.
5. Being at the forefront of new product development.
6. Differentiating its product or service from those of competitors.

 Strategic marketing plans for the future. It sets out the ‘big picture’ of where you want to be in say
5 years’ time. It is the overall plan for achieving long-term marketing objectives.
 Tactical marketing looks at a much shorter time period, concentrating on how the products or
services currently performing in the market and how this performance can be improved.
 Operational marketing looks at how best to satisfy customer needs on the day-to-day basis.

Product development: summaries the plans related to new/existing products, including an outline
of the product range, innovations/updates, product/service delivery initiatives and activities in support
of a balanced product portfolio.

SWOT Analysis: summarises the internal strengths/weaknesses of

the business from a marketing perspective and outlines the potential
opportunities/threats facing the business. A marketing department
might assess the current market conditions and the quality of its
current marketing strategies. These can then be considered in
relation to the future. What might happen? How might the
competition react? What is happening in the wider market?

Market Research: outlines the market research activities

undertaken/planned and states the key findings that require further consideration.
Market positioning: articulates the market position of each product/service provided by the
business in relation to the business’s product portfolio and competitors’ products/services available in
the market, and considers activities in relation to the product life cycle for the product/services.
Positioning maps, sometimes referred to as Perceptual maps, are usually two-dimensional maps
drawn-up by a business to help it develop and implement an effective market positioning strategy.
Consider the following perceptual map for confectionary. It uses two basic dimensions of quality and
price.

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With this information a business launching a new brand of confectionery may consider positioning its
product in the high quality – low price quadrant, with a medium price tag, as there is little competition
in that sector and it would be a good to have customers have that perception of the product. There is
even less competition in the low quality - low price quadrant, but that would be a sector best avoided.
And certainly no business would like customers to perceive their product as having a high price and low
quality image!

Business objectives: summarises the ways in which the marketing strategy and activities undertaken
will support the business objectives to ensure achievement of successful outcomes.
Marketing strategy: outlines the key activities to be undertaken in respect of the marketing mix, the resources
available to the business organisation and the arrangements for feedback/review going forward.
Strategies
Cost leadership The aim of a cost leadership strategy is to gain a cost advantage over competitors.
This low cost advantage can then be passed on to consumers in the form of lower
prices.
Differentiation This strategy is where a business offers consumers something different from that
which is offered by its competitors, in order to gain a competitive edge over them.
Focus This is where a business attempts to meet effectively the needs of a clearly defined
group of consumers to gain a competitive advantage over others.
Market leader The majority of markets have one dominant business that has control over the largest
Strategies share of the market. Market leaders use a variety of strategies to retain that position
and improve on it in the long term. They may try to improve their market share by the
use of aggressive marketing, or they may try to achieve market growth and at the
same time improve their market share. Tesco is an example of a business that has
used all these tactics to achieve and maintain its market dominance.
Market In this situation, a business with a smaller market share may try to attack the
challenger dominance of the market leader. In order to be able to do this, the business will need
strategies a substantial marketing budget at its disposal. The attack may be made directly by
trying to take market share through the use of promotion. More commonly, however,
the challenge will be made in an area where the dominant firm is relatively weak.
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Market follower Market leaders will normally respond to ‘market challenger’ strategies with some
strategies form of retaliatory action. For example, if one supermarket starts a cut-price
campaign, others are likely to follow and the market leader will be well-placed to cut
prices most aggressively to win the price war.
Market niche Niche markets are small corners of a bigger market where businesses may choose to
strategies specialise. The market segments are usually quite small and customers have very
specific demands. The Morgan car company operates in a niche market, selling
handmade touring sports cars.

Marketing Budget: summarises the costs of all the marketing activities to be undertaken in the next
period and if appropriate, any revenues that the business is expected to generate.
A marketing plan will only be successful if sufficient resources are available to implement the plan fully.
In setting out a marketing strategy, one of the most important requirements is that the business should
be realistic, particularly with regard to the amount of money it spends. Small firms will only usually be
able to market through the use of local advertising; flyers, local media and publicity are the most likely
methods of promotion. Only large businesses can afford to run large marketing departments and make
use of national and international media for promotion. Small firms may be able to adjust their good or
service to meet the demands of their market, but they are likely to have less pricing flexibility than
larger businesses.

If the firm fails to adequately cost the marketing plan in terms of time and finance, it will be confronted
with an unrealistic plan, which it will struggle to execute effectively.

Business Advantages of a Marketing Plan

 identifies needs and wants of consumers
 determines demand for product
 aids in design of products that fulfil consumers’ needs
 outlines measures for generating the cash for daily operation, to repay debts and to turn a profit
 identifies competitors and analyses your product's or firm's competitive advantage
 identifies new product areas
 identifies new and/or potential customers
 allows for test to see if strategies are giving the desired results
 May be required in order to receive finance to cover marketing and other costs.
 It ensures the survival of a business by giving it time to reflect upon the efficiency of its operations.
The external environment changes constantly and any business needs to take account of this.
 A marketing plan ensures that the business uses its human and financial resources most effectively.
Resources can be reallocated to where they are needed most.
 Through setting marketing objectives and targets in the planning process, the owners/managers will
have a way of measuring the progress of the business.
 The setting of such targets will also motivate the owners/managers to achieve them.
 Ensures that the marketing mix is appropriate.

How it is useful to a business’s management team?

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• States a clear strategic direction (i.e. set objectives/targets) regarding how management intend to
attract and retain customers
• Helps forecast sales: the current and future sales quantities/revenues are established and targets set,
which guides future production and supports activities for the future
• Develops brand awareness
• Addresses and identifies potential problems
• Identification of new opportunities – Market research summarises findings of current market
research and enables effective decision making to ensure that the business can meet the needs of
consumers and build brand loyalty
• Facilitates comparisons
• Indicates future product development initiatives on a product line basis, including innovations
• Reduce the risk of failure
• The SWOT analysis assesses the current strengths, weaknesses, opportunities and threats facing the
business and which can be addressed using the product service range in order to achieve business
objectives.
• Assists with financial planning (Budget), it articulates the resources required to implement the
marketing plan, including costs. This enables managers to take effective decisions and control the
activities of the marketing function of the business.
• Help gain competitive advantage
• Motivational for management as it articulates the various strategies that the business will implement
(strategies) in respect of the marketing mix elements and the policies to be followed in order to achieve
objectives, which will help decision making and planning.
• Integral part of business plan, e.g. used to secure additional funds

Business Disadvantages of a Marketing Plan

 A marketing plan may be inaccurate, since it is based on estimates and the assumptions may be
unrealistic, thus any targets set may be too difficult to achieve and as a consequence may
demotivate the members of the management team
 identifies weaknesses in your business skills
 leads to faulty marketing decisions based on improperly analysed data
 creates unrealistic financial projections if information is interpreted incorrectly
 identifies weaknesses in your overall business plan
 The time and expense involved in drawing it up. All businesses will also have to continually
update it and evaluate its progress. This takes focus off the core activities of the business.
 The external environment is changing constantly so the owners/ managers will find it difficult to
take account of all the relevant factors impacting upon the business at any given time.
 Employees/managers may find that having such targets might prove restrictive. Too much
attention might be given to meeting targets causing the business to lose focus on its customers.
 It may be difficult or expensive for the business to gather accurate, quantitative data necessary
for a marketing plan.
 Workers may be demotivated if targets in plan not achieved.
 It is difficult to forecast sales quantities and prices; therefore an extrapolation of data may be
misleading in terms of financial data used for projections.
 The plan may contain bias and therefore leads to incorrect decision making on the part of
management and wasteful use of resources that do not yield sufficient returns.

Market Segmentation
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 Market segmentation: is the subdivision of an entire market into smaller subsets of customers (or
segments) that appear to possess similar needs.

Types of Market Segmentation

A number of different ways of segmenting a market can be identified.

1. Demographic segmentation is by age, family size, occupation, ethnicity, education and

income. For example, a new computer game may be aimed at male children between the ages of 12 and
18 years. A new teaching text book on Business Studies would be primarily aimed at business studies
teachers. Demographic segments: examples include classifying consumers according to age, gender,
marital status, family size and family life cycle.
The main forms of demographic segmentation are age and gender.

o Age. For many products and services, age is a crucial influence on demand, so firms will segment
on this basis. Holidays are a classic example: Club 18–30 targets its holidays at a specific age
range, while Saga holidays are aimed at people aged over 50 years. Large firms try to provide a
range of products that will reach all ages. A magazine publisher will produce different magazines
for teenagers, 20- and 30-somethings, the middle-aged and the elderly.

o Gender (sex). Some products are targeted specifically at males or females. The market for
perfume is dominated by females, while attendance at sporting events has been dominated by
male customers. However, in both these cases, firms have recognised the potential for growth by
targeting the other gender.

o Ethnicity. In recent years companies have become increasingly aware of the varying wants and
needs of different ethnic groups and have begun to respond by producing products to satisfy the
specific requirements of these different ethnic groups. For example, L’Oreal has begun to
produce different hair product for Black and Asian hair types.

2. Geographic segmentation is by town, county, country, climate and population growth rate.
For example, a leisure sight-seeing tour business may segment the market by town, county or even
country. The developer of a new type of child pram may use population birth growth rate to segment
the market.
Although regional variations in taste are becoming less significant, there are still major differences in
tastes and purchasing behaviour based on geographical features. Rambling, surfing, theatre visits and
nightclubbing are all activities that are influenced by the place where someone lives. Geographic
variations may be linked to regions (e.g. differences in tastes between the north and south), to the
differences in spending patterns in urban as opposed to rural areas, and to geographical features such as
the terrain and climate.
One of the main geographic methods is ACORN (A Classification Of Residential Neighbourhoods). This
approach segments the market according to types of housing. Over 30 different categories of housing
are identified by this technique. Families in suburban detached houses are expected to have very
different tastes from those living in terraced houses in rural areas. Postcodes can be used to identify
these segments, helping firms to target their marketing.

3. Behaviouralistic segmentation is based on how customers react to and behave towards

certain products. It involves analysing the customers’ brand loyalty, usage, responses and price
sensitivity to products or services on offer. Behavioural segments: these are often based on consumers’
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attitudes to a particular product. Examples include heavy/light user, degree of brand loyalty, early/late
adopter, like/dislike, nature of benefits sought from the product. Behavioural segments may also be
based on the character of the consumer, such as lifestyle, interests and opinions.
Behavioural segmentation focuses on what customers actually do. For example, it analyses customers in
terms of:
o when they buy (the purchase occasion). For example, many people start dieting or buy products to
give up smoking in January as they start a New Year and want to change themselves.
o how much they buy. For example, are they heavy users or light users of the product? Do they buy
just for themselves or for family members? This could obviously affect issues such as the sizes in
which products are offered.
o brand loyalty? Do they stay with the same brand or switch? If they are switchers you might be able
to attract them with special offers. If they are brand loyal you might want to reward them to
encourage others to become loyal.
o the benefit they want from the product. Are they buying a Harley Davidson as a means of transport
or to reward themselves for their achievement in life? Or because they are getting worried about
getting older and want to relive their youth? Or because it reminds them of the freedom they once
had when they were young? Understanding this will influence decisions such as the way a product is
promoted.
Two examples of behavioural segmentation are outlined below:
o Lifestyle. This type of segmentation is becoming more popular as businesses can use credit card and
loyalty card records to identify the pattern of individuals’ expenditure. Family food purchases are
classified into categories according to the tendency to buy takeaways, organic food, economy
brands, health foods, etc. Leisure pursuits are also used to segment customers for marketing
purposes.
o Usage/frequency of purchase. Some customers, known as ‘early adopters’, like to be the first to try
new products; in contrast, ‘followers’ are more cautious. Awareness of these customer types allows
a firm to target the right people. Similarly, consumers can be classified according to how often they
purchase products. A frequent purchaser will have a different view of a product from an occasional,
casual user.

4. Income segments: examples include classifying consumers according to family income,

occupation and social class. Income is an important influence on consumer spending. Sophisticated databases
enable businesses to have a greater understanding of the level of income of individuals and families, so that
products and marketing messages can be targeted at people whose incomes make them more likely to buy a
certain product or brand. Although it is not a totally reliable relationship, occupations can provide a guide to
incomes and tastes. In the UK social class is a basis for market segmentation.
High-income users of a bank, a holiday company or a hotel may have different demands than low-
income users. High-income earners are more likely to be interested in products to do with saving and
investing; lower-income groups are more likely to be interested in borrowing. High-income earners
generally may be more interested in overseas holidays, business-class airline seats, private healthcare
insurance and advice on buying shares and new cars.

A common way of segmenting people based on income and their professions is known as socioeconomic
grouping. The most common categories of socioeconomic groupings are:
A: Higher managerial, administrative or professionals
B: Intermediate managerial, administrative or professional
C1: Supervisors, clerical and junior managerial, administrative or professional
C2: Skilled manual workers
D: Semi and unskilled manual workers
E: Casual labour.
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 Benefits and Drawbacks of Market Segmentation
The benefits and drawbacks of market segmentation apply to all the types of segmentation. However,
the extent to which a particular organisation might benefit from segmentation depends on the degree
to which:
o a particular segment can be easily identified
o consumer behaviour varies according to market segmentation
o the firm is able to reach that segment directly in its marketing and market research
o the firm is able to generate profit from that market segment.
Benefits of market segmentation
• To increase market share. An organisation can identify market segments that have not been reached
and adapt its products and marketing to reach those segments. For example, Sky channels have a bias
towards male viewing and so Sky Living was introduced. It is the TV channel with the highest percentage
of female viewers.
• To assist new product development. Gaps in market segments can be used to indicate the scope for
introducing new products. The Nintendo Wii has attracted casual games users and is much more popular
with girls and young children than other games consoles.
• To extend products into new markets. Mobile phones were initially targeted at business users before
being extended to teenagers and then whole families.
• To identify ways of marketing a product. A company that recognises its customers’ characteristics can
target its advertising to media used by that market segment. For example, someone in social class A is
more likely to read The Times, whereas someone in social class E has a greater tendency to read the
Daily Star. Similarly, promotional methods and messages can be modified to suit specific segments – for
instance, young people prefer different images to older consumers.

Drawbacks of market segmentation

• Difficulty in identifying the most important segments for a product. Successful segmentation requires
market segments to be identifiable, reachable and distinct. In practice, a business may be unable to
categorise its customers. Some segments, such as gender, are easy to identify, but it is more difficult to
put consumers of bread, household cleaners and pillows into categories.
• Reaching the chosen segment with marketing. Lifestyle categories in particular are difficult to identify
or locate. Which media would you use to attract primary school parents on a national scale? In general,
socio-economic class tends to be the most difficult of the demographic segments to target.
• Recognising changes in the segments interested in the product. Markets are dynamic and businesses
cannot assume that an existing segment will always stay loyal to their product, so they must constantly
research their market segments.
• Meeting the needs of customers not included in the chosen segment. Emphasis on market
segmentation may lead to a business ignoring other potential customers. This may prevent a business
from attracting the mass market.
• Profitability may be low since the market is subdivided into smaller segments which may not yield
economies of scale for the business.
• Growth may not materialise to the extent required by the business therefore market share may not be
sufficient to sustain marketing support.

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