What is Strategic Marketing Planning?

Every CEO and marketing executive periodically faces urgent strategic marketing challenges that can affect the future of the company for many years. Frequently these decisions are made without having an opportunity to study the situation and make the best possible decision. Making spur of the moment strategic decisions reduces the likelihood that these decisions are the best. A better approach is to perform an annual comprehensive review of markets and opportunities, then make long-term strategic decisions without the distractions of day-to-day marketing and sales activities. Daily decisions then fit into the company's overall strategic marketing goals. It's important for a strategic marketing planning process to look at the company from the customer's point of view by asking questions that have a long time horizon, such as:

What needs or problems cause customers to consider buying from our company? What improvements in the customer's personal or business life can we enable or improve? Which customer market segments are attracted to our company or products? Which customer motivations or values lead people to decide to purchase our products? What changes or trends in our customer base are affecting their general interest or attraction to products like ours?

Strategic vs. Tactical Marketing Plans

What makes a strategic marketing plan different from a more tactical marketing communications plan? The key difference is the focus on meshing overall customer situations with your overall company direction. For business-to-business marketers, this means combining industry sector segmentation and product use with other factors related to purchase decisions. These include the purchase criteria and decision motivations that affect large, enterprise size purchases. For example, the trend toward increased use of outsourcing to both domestic and global vendors creates markets for those suppliers. However, those vendors need to have a strategic marketing vision in order to see these new markets early enough to take advantage of the opportunity. For consumer marketers, this means using geographic and demographic segmentation, as well as psychographic segmentation (i.e., values, attitudes, lifestyles), and product usage motivations. For example, the aging population bubble creates a general increase in demand for a wide range of products. It also creates market niches that are large enough to make product development and marketing worthwhile. The same shifts can also reduce demand for other products. These long term shifts in markets are frequently misinterpreted as short-term competitive pressures or fluctuations in the economy. Instead of increasing advertising or sales efforts, it might be better to abandon a declining market. Without a strategic marketing plan a company could waste resources or miss an opportunity. What's the cost of missing an opportunity? Of course, it's impossible to know at the time the opportunity is missed, but years later it will become clear when a competitor opens a new factory or enters a new market -- and their revenue grows faster than their competitors. In other words, the annual cost of a strategic marketing plan review is miniscule compared to the revenue, market share, and profitability it can generate.

Developing the Strategic Marketing Plan

The strategic marketing plan process typically has three stages: 1. Segment the market Geographic Demographic Psychographic Behavior Profile the market segments Revenue potential Market share potential Profitability potential Develop a market segment marketing strategy Market leader or product line extension Mass marketing or targeted marketing Direct or indirect sales

2.

3.

After analyzing market segments, customer interests, and the purchase process, it's time to create the strategic marketing plan. The strategic marketing plan document usually includes:

Situational Analysis - Where is the company now? a. Market Characteristics b. Key Success Factors c. Competition and Product Comparisons d. Technology Considerations e. Legal Environment f. Social Environment g. Problems and Opportunities Marketing Objectives - Where does management want the company to go? a. Product Profile b. Target Market c. Target Volume in Dollars and/or Units Marketing Strategies - What should the company do to achieve its objectives? a. Product Strategy b. Pricing Strategy c. Promotion Strategy d. Distribution Strategy e. Marketing Strategy Projection

How to Use a Strategic Marketing Plan

Once a company's executive team has approved the strategic marketing plan it's time to take the next step -- create the tactical marketing programs and projects needed to implement the plan. These tactical programs usually include:

Product Development Plan Marketing Communications Plan Sales Development Plan Customer Service Plan

Benefiting from a Strategic Marketing Plan

The top-down process of developing a strategic marketing plan helps insure that all tactical marketing programs support the company's goals and objectives, as well as convey a consistent message to customers.

This approach improves company efficiency in all areas, which helps improve revenue and market share growth, and minimizes expenses -- all of which lead to higher profitability.

up of people or organizations with one or more characteristics that cause them to demand similar product and/or services based on qualities of those products such as price or function. A true market segment meets all of the following criteria: it is distinct from other segments (different segments have different needs), it is homogeneous within the segment (exhibits common needs); it responds similarly to a market stimulus, and it can be reached by a market intervention. The term is also used when consumers with identical product and/or service needs are divided up into groups so they can be charged different amounts for the services. The people in a given segment are supposed to be similar in terms of criteria by which they are segmented and different from other segments in terms of these criteria. These can be broadly viewed as 'positive' and 'negative' applications of the same idea, splitting up the market into smaller groups. Examples:

Gender Price Interests Location Religion Income Size of Household

While there may be theoretically 'ideal' market segments, in reality every organization engaged in a market will develop different ways of imagining market segments, and create Product differentiation strategies to exploit these segments. The market segmentation and corresponding product differentiation strategy can give a firm a temporary commercial advantage.

Contents

1 Bases for segmenting consumer markets 2 Geographic segmentation 3 "Positive" market segmentation 4 Using Segmentation in Customer Retention o 4.1 Process for tagging customers 5 Price Discrimination 6 References

[edit] Bases for segmenting consumer markets

Geographic segmentation Demographic segmentation Psychographic segmentation Behavioral segmentation

[edit] Geographic segmentation

The market is segmented according to geographic criteria- nations, states, regions, counties, cities, neigborhoods, or zip codes. Geo-cluster approach combines demographic data with geographic data to create a more accurate profile of specific geographic areas.

[edit] "Positive" market segmentation

Market segmenting is dividing the market into groups of individual markets with similar wants or needs that a company divides into distinct groups which have distinct needs, wants, behavior or which might want different products & services. Broadly, markets can be divided according to a number of general criteria, such as by industry or public versus private. Although industrial market segmentation is quite different from consumer market segmentation, both have similar objectives. All of these methods of segmentation are merely proxies for true segments, which don't always fit into convenient demographic boundaries. Consumer-based market segmentation can be performed on a product specific basis, to provide a close match between specific products and individuals. However, a number of generic market segment systems also exist, e.g. the system provides a broad segmentation of the population of the United States based on the statistical analysis of household and geodemographic data. The process of segmentation is distinct from positioning (designing an appropriate marketing mix for each segment). The overall intent is to identify groups of similar customers and potential customers; to prioritize the groups to address; to understand their behavior; and to respond with appropriate marketing strategies that satisfy the different preferences of each chosen segment. Revenues are thus improved. Improved segmentation can lead to significantly improved marketing effectiveness. Distinct segments can have different industry structures and thus have higher or lower attractiveness Once a market segment has been identified (via segmentation), and targeted (in which the viability of servicing the market intended), the segment is then subject to positioning. Positioning involves ascertaining how a product or a company is perceived in the minds of consumers. This part of the segmentation process consists of drawing up a perceptual map, which highlights rival goods within one's industry according to perceived quality and price. After the perceptual map has been devised, a firm would consider the marketing communications mix best suited to the product in question.

[edit] Using Segmentation in Customer Retention

The basic approach to retention-based segmentation is that a company tags each of its active customers with 3 values:

Tag #1: Is this customer at high risk of canceling the company's service? One of the most common indicators of high-risk customers is a drop off in usage of the company's service. For example, in the credit card industry this could be signaled through a customer's decline in spending on his or her card. Tag #2: Is this customer worth retaining? This determination boils down to whether the postretention profit generated from the customer is predicted to be greater than the cost incurred to retain the customer. Managing Customers as Investments. [1] [2] Tag #3: What retention tactics should be used to retain this customer? For customers who are deemed save-worthy, its essential for the company to know which save tactics are most likely to be successful. Tactics commonly used range from providing special customer discounts to sending customers communications that reinforce the value proposition of the given service.
[edit] Process for tagging customers

The basic approach to tagging customers is to utilize historical retention data to make predictions about active customers regarding:

Whether they are at high risk of canceling their service Whether they are profitable to retain What retention tactics are likely to be most effective

The idea is to match up active customers with customers from historic retention data who share similar attributes. Using the theory that birds of a feather flock together, the approach is based on the assumption that active customers will have similar retention outcomes as those of their comparable predecessor.

[edit] Price Discrimination

Where a monopoly exists, the price of a product is likely to be higher than in a competitive market and the quantity sold less, generating monopoly profits for the seller. These profits can be increased further if the market can be segmented with different prices charged to different segments charging higher prices to those segments willing and able to pay more and charging less to those whose demand is price elastic. The price discriminator might need to create rate fences that will prevent members of a higher price segment from purchasing at the prices available to members of a lower price segment. This behavior is rational on the part of the monopolist, but is often seen by competition authorities as an abuse of a monopoly position, whether or not the monopoly itself is sanctioned. Examples of this exist in the transport industry (a plane or train journey to a particular destination at a particular time is a practical monopoly) where business class customers who can afford to pay may be charged prices many times higher than economy class customers for essentially the same service.
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