The marketing environment

Examining both the internal and external marketing environments can identify both opportunities and threats to the business and is a core component of the plan. The whole area is usually broken down into the macro, micro and internal environments as summarised in the diagram below.

The macro-environment

A commonly used method of quantifying the macro external environment is with a PEST analysis. PEST is an acronym which divides the macro-environment into four areas – Political, Economic, Social, and Technological, examples of which are shown below.

Political environmental factors

• Trading agreements
• Tax rules
• Employment regulation
• Environmental legislation
• Legal issues

Economic environmental factors

• Recession
• Interest rates
• Exchange rates
• Rate of inflation
• Population wealth
• Growth of the housing market

Social environmental factors

• 'Green' behaviour
• Eating habits
• Shifts in attitude
• Population demographics
• Attitudes to career

Technological environmental factors

• Emergence of new communications channels
• Improved production processes
• Advances in computing and the internet
• New technologies such as electric vehicles
• Automation
• Reduced cost of materials

Micro-environment

The micro-environment includes factors which are still not directly under the control of the company, but more directly relevant to strategy such as consumer trends, stakeholders, suppliers and competitors. Some example items are listed below.

• Summary of your market segment
• Market growth, trends and competition
• Potential new markets
• Direction from shareholders
• Supplier costs and service quality
• Changes is consumer behaviour

Understanding your customers and market

Ensuring a thorough knowledge of the consumer is vital for successful marketing planning. Use the primary and secondary (first and second hand) market research information at your disposal to describe your customer. The more accurate your picture of your consumer, the better you'll be able to design products which cater for their needs and the easier it will be to communicate with them. If you have a broad customer base, you might need to split your customers into groups (segmentation).

• Typical customer demographics
• Customer profile
• Market size
• Market geography

More information on segmentation, targeting & positioning

Understanding your competitors

• Who are your competitors?
• What are they likely to be doing?
• Strengths
• Weaknesses
• Reputation and brand equity
• How are they using the marketing mix?
• Infrastructure and supply chain
  

Internal environment

The internal marketing environment includes factors that the business can directly influence. This can include:

• The organizational structure
• The strengths and weaknesses of a department
• Financial stability and resources
• Staff morale
• Spare production capacity
• Client base
• Pricing structure
• Selling channels
• Staff skills

Identifying opportunities in the marketing environment

Once you have completed the internal and external environmental audit, you can summarise your findings using a SWOT analysis which can be used to make key decisions.

 

SWOT analysis

A 'SWOT analysis' is a useful way of summarizing the results of the environmental audit and presenting the current status of a business. SWOT simply stands for the Strengths, Weaknesses, Opportunities and Threats which have emerged from examining the macro, micro and internal marketing environments.

For example, here is a SWOT analysis for a fictional electric car manufacturer

Strengths Our electric motors are cheap to produce and maintenance free Charge time is class leading Production capacity can be increased R&D department is class leading	Weaknesses Batteries are heavy, slow to charge and provide limited mileage Dealer network is small Customer trust in the segment is low Market is highly competitive
Opportunities Government grants are available Road tax breaks for electric cars Market is growing rapidly Battery technology is evolving	Threats Tesla has secured a large government grant The big players are investing heavily Hybrid and diesel technology is evolving fast

Stage 2: Marketing strategy

This section includes the following elements:

• Development of mission statement
• Statement of objectives
• Strategy and tactics to accomplish the objectives

Mission statement

Your mission statement is a formal commitment and focus for the business. It should explain to customers concisely what the nature of your business is and where you are going, and also provide a motivational tool for employees. It should be aspirational, something to strive for, yet obtainable and relevant. Once this has been defined it should form the focus for your business strategy.

Vision statement

A vision statement is a more long term, ideal-world statement which outlines where you would like to take the business in the long run.

 

Objectives

Combined with the mission statement, your objectives should be the key statements that drive your business. The most successful goals follow the SMART acronym. Specific, measurable, achievable, realistic and time bound.

• What do you want to achieve by the end of this year?
• Where do you want to be in one, five, ten years?

Objectives must be quantitative in order to accurately measure success. For example, 'sell 600 units in the next year' or 'increase customer retention by 20%'.

 

Selecting a suitable strategy

 

Selecting a strategy for growth - the Ansoff Matrix

Most businesses need to grow, and the Ansoff Matrix (below) is a method of determining the best course of action if growth is your priority.

 

	Existing products	New products
Existing markets	Market penetration	Product development
New markets	Market development	Diversification

 

Market penetration

Increasing market share in a current market with a current product.

Example tactics:

• Aggressive pricing policy (see 'cost leadership' in Porter's model)
• Re-branding
• Increasing marketing spend

Market development

Taking existing products into new markets

Example tactics:

• Finding a new use for an existing product
• Expanding the distribution network
• Strategic partnerships in international markets

Product development

Developing a new product for a market which you have already entered

Example tactics:

• Creating a range of similar products, for example shaving foam if you are already manufacturing razors

Diversification

Developing a new product for a completely new market

Example tactics:

• Market research
• Product research and development

Selecting a pricing strategy

Once you have determined the product and market you want to be in, the next problem will be setting a price. Porter's model discusses three strategies for competitive advantage based on price.

Three generic strategies for competitive advantage - Porter's model

• Cost leadership: A good quality product at a lower price than the competitors

• Differential strategy: A product or service which is perceived as unique within a particular market

• Focus strategy: Delivering focused attention to a particular segment to deliver service which competitors cannot compete

Determining which products to invest in

If you have a product range it is likely that some will do better than others. The Boston Consultancy Group matrix is a method of determining which to invest in, and which to drop, shown below.

 

	High market share	Low market share
High market growth	Stars	Question marks
Low market growth	Cash cows	Dogs

 

Stars

High growth products with a strong market presence. Probably need high investment to maintain position.

 

Cash cows

Low growth products with a high market share. Probably don't need much investment, but require management to maintain profitability.

 

Question marks

Products which have potential, but may require investment to yield decent profits.

 

Dogs

Rarely worth investing in, dogs should at least break even to be retained.

Tactics - the marketing mix

The marketing mix is a selection of customer focused business elements which work together as a toolkit to market your product or service. The tactical section of a marketing plan summarises how you intend to use each element of the marketing mix, which can be summarised in seven 'Ps' as shown in the illustration below.

 

Product

Product refers to the items you are selling or the service you are providing. Your product based tactics link back to your overall strategy - if your strategy is market penetration (see the Ansoff matrix), then there may be little need to do anything to the product. However if you have chosen product development or diversification, then a certain amount of research and development, and product design will be needed.

Should the product be premium, or good value? Disposable or last a lifetime? Fast or slow? How will it be packaged? Where will it be made? Is it environmentally sound?

 

Price

• Pricing is one of the most important factors when deciding your marketing tactics, which could involve the following:
• Skimming – low market penetration, high pricing strategy for premium products
• Comparable pricing – if you are not the market leader, competitors will have set a price expectation which can be followed
• Market penetration strategy – deliberately low pricing in order to enter or control a market quickly.
  

Place

Place refers to the method of getting your product to the consumer - this could be a dealership or an online shop.

How will you attract more retailers to sell your product? How will you maintain a premium appearance? How will your distribution network function? How many countries should you operate in?

Promotion

Promotion is much more than just advertising - this is the discipline of marketing communications.

What is your branding strategy? Which promotional channels will you use? How will you divide up the budget? Will billboards work better than TV ads? What should be the discount for special offers? How will you generate positive PR? Should you outsource the creative work?

 

Our guide to promotion and advertising strategy

People

People refers to all the customer facing staff in your organisation, not just the sales staff.

What training do they require? Do they know the products well? How much commission should they get? Should you outsource? Do they need a uniform? What incentives can you give?

 

Process

Process refers to the procedures which are followed when delivering a service to a customer.

For example, for a hotel - how are customers greeted? Who takes the baggage to the room? When are the rooms cleaned? What time is breakfast?

This element of the marketing mix should also include your customer relationship management (CRM) process, or in other words, how you manage customers through the purchasing funnel.

 

Physical evidence

This element of the marketing mix is mostly used to promote services. If you're not selling anything tangible, how will people know what they're getting?

This is where physical evidence comes in. Examples of physical evidence include a brochure for a holiday tour, customer testimonials for a dentist, or a portfolio for a website design company.

 

Segmentation, targeting & positioning

When using the marketing mix, it is important to keep in mind the three generic stages of marketing - segmentation, targeting and positioning. Segmentation is the detailed breakdown of your customers into as much detail as practical, targeting then ensures all elements of the mix are tailored to your identified consumer group. Positioning the process of ensuring potential and current customers perceive your company in the way you would like them to.

Stage 3: Actions, measurement and controls

How will you monitor progress? Who will do which jobs? When will each element be completed? How will you adjust the plan? What will be the budget? This section discusses action plans, controls, measurements and reporting.

 

Actions

Developing an action plan

An action plan is core to the marketing process – a constantly evolving document which is cascaded to the relevant people and monitored regularly. Most action plans are relatively short term documents which focus on the coming year, but longer term implications should also be considered.

 

Action planning is a stages approach:

• Clarify goals, and ensure they are SMART
• Link back to your objectives and tactics
• Set criteria for success
• Prioritize
• Set timings
• Determine who will complete each action point
• Monitor the progress of the plan and review regularly

An example action plan is shown below

Measurements, controls and reporting

The final stage of the action plan is the implementation of measurements and controls and reporting results. Many models for monitoring the performance of businesses have emerged, many of which address the needs of key stakeholders and allow them to evaluate the overall success of a company.

 

The balanced scorecard approach for monitoring company performance

The balanced scorecard approach is a widely used method of monitoring overall performance and ensuring daily work is focused on the strategic objectives. The scorecard is a "strategic planning and management system…which is used to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals". This approach encourages open communication throughout the business and allows tracking of performance throughout the year.

 

Reference: http://www.balancedscorecard.org

 

Traditionally, businesses have tracked success based on just one measure – financial results. However the scorecard system views the business from four external perspectives to gain a more relevant approach to performance metrics.

• Learning & growth – how you are innovating and improving to meet your goals
• Business process – how critical processes are measuring up
• Customer perspective – usually measured in terms of time, quality, performance and cost
• Financial perspective – financial performance from the stakeholder point of view

Each element is tracked using four items which are listed individually:

• Objectives - as identified in stage 2 of the marketing planning process
• Measures - how will success be measured?
• Targets - specific quantifiable targets
• Initiatives - how to make the targets more readily achievable

The balanced scorecard approach to performance measurement is summarised below

 

Key performance indicators (KPIs)

Depending on your industry, you may also have certain specific metrics which determine success, these could include:

• Market share analysis
• Sales analysis
• Quality control
• Financial results
• Market research
• Marketing information systems
• CRM - New customers acquired, retention
• Service levels
• Brand awareness
• Competitor performance
• Benchmarking
• Profitability

Gap analysis

Gap analysis is another useful tool which answers two questions: Where are you? Where do you want to be? It can be useful to identify where you are with the following facets of the business:

• Organisation
• Business direction and marketing mix
• Business processes
• Information technology
• Requirements vs capability
• Market potential vs existing usage
• Your business vs competition

Feedback

Now that you have an accurate picture about the success of your plan it's important to feedback this information in order to fine tune the strategy and update the courses of action accordingly.

 

Final words

The marketing planning process is a comprehensive method for examining your business, your market and the environment in order to develop a strategy to exploit opportunities. It is a vital process which should be used by almost every company to ensure a profitable and sustainable future.

 

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Further references:
CIM marketing planning tool