It is important to note those earlier identified ‘threats’ to your business to ensure that, as you forecast, you can see the deviation of the best and worst models. For example, if a business has previously identified the threat of a diminishing cheap labor force, then its forecast needs to reflect that the price of labor (or any other resource, such as power) is going to go up.
This seeks to forecast a bank balance after a period – typically 12 months. This forecast shows the sources and application of funds.
This modifies the cash flow in an attempt to calculate taxable income and, in the process, forecast a businesses income tax liability. There are two differences between a cash flow and a profit forecast. The cash flow forecast includes all expenditure in the period, whereas the profit forecast looks to match revenue with the costs associated with generating that revenue. To achieve this, one uses non-cash expenses to estimate some of the costs associated with running a business.
These two forecasts are reconciled with a forecast balance sheet.
While we have based this example on a smaller business and, while forecasting balance sheets demonstrates completeness and a high level of technical integrity in forecasting, we feel the process is complex and better left to a professional. We also feel that the additional benefit is outweighed by the costs for a small business.
It is always easier to forecast the future performance of a business if your business is already up and running as there are past trading results to look at. When a completely new venture is being planned, a certain amount of imagination is required. However, this is in no way a license to be overly optimistic.
By completing these scenarios you gain an insight into the various risks that a business faces. Spreadsheet programs make this quite easy if they are well set up.
This is the dominant influence on the performance of your business. Also, many expenses have a link to the level of activity in a business.
For existing businesses, past sales are the best predictor of future sales, for new businesses it is less simple. However, once the business is established, you will find you have a better understanding between the business’s products and its markets.
The most important thing is to keep detailed records of sales as it is these that will provide you with the growing ability to forecast income accurately.
The essential difference between cash flow and profit is that cash flow includes all items of income and expense, whereas profit seeks to match income and costs related to the generation of the income in a period of time; usually 12 months.
To facilitate the calculation of profit (and hence, the income tax due) the cash flow statements were split into four sections. We now take the total of income and the operational costs into a Profit Statement. We add depreciation to the operational costs and subtract our adjusted operational costs from income. This difference will indicate a profit (where the difference is positive) or a loss (where the difference is negative).
Where there is profit, we need to then calculate income tax. This calculation depends on the legal structure adopted for the business. Where a business is registered for Goods and Services Tax, we take only the net payments and receipts into account.
It should be noted there is always a risk in new product development. Despite the time and effort put into planning the new product may not earn a significant return on investment.
In corporate finance, investment banking, and the accounting profession, financial modeling is largely synonymous with cash flow forecasting.
This usually involves the preparation of detailed company specific models used for decision making purposes and financial analysis.
A financial forecast is an estimate of future financial outcomes for a company or country (for futures and currency markets). Using historical internal accounting and sales data, in addition to external market and economic indicators, a financial forecast is an economist’s best guess of what will happen to a company in financial terms over a given time period—usually one year.
Arguably, the most difficult aspect of preparing a financial forecast is predicting revenue. Future costs can be estimated by using historical accounting data; variable costs are also a function of sales.
Unlike a financial plan or a budget, a financial forecast doesn’t have to be used as a planning document. Outside analysts can use a financial forecast to estimate a company’s success in the coming year.
Forecasting is the process of making statements about events whose actual outcomes (typically) have not yet been observed. A commonplace example might be the estimation of some variable of interest at some specified future date. Prediction is a similar, but more general term. Both might refer to formal statistical methods employing time series, cross-sectional or longitudinal data, or less formal judgmental methods.
Time series is a sequence of data points, measured typically at successive time instants and spaced at uniform time intervals. Examples of time series are the daily closing value of the Dow Jones index or the annual flow volume of the Nile River at Aswan. Time series analysis comprises methods for analyzing time series data in order to extract meaningful statistics and other characteristics of the data. Time series forecasting is the use of a model to predict future values based on previously observed values. Time series are very frequently plotted via line charts.
Cross-sectional data refers to data collected by observing many subjects (such as individuals, firms or countries/regions) at the same point in time, or without regard to differences in time. Analysis of cross-sectional data usually consists of comparing the differences among the subjects.
For example, if we want to measure current obesity levels in a population, we could randomly draw a sample of 1,000 people from the population (also known as a cross section of that population), measure their weight and height, and calculate what percentage of that sample is categorized as obese. For example, 30% of our sample may be categorized as obese based on our measures. This cross-sectional sample provides us with a snapshot of that population, at that one point in time. Note that we do not know based on one cross-sectional sample if obesity is increasing or decreasing; we can only describe the current proportion. Cross-sectional data differs from time series data also known as longitudinal data, which follows one subject’s changes over the course of time. Another variant, panel data (or time-series cross-sectional (TSCS) data), combines both and looks at multiple subjects and how they change over the course of time. Panel analysis uses panel data to examine changes in variables over time and differences in variables between subjects.
A longitudinal study is a correlational research study that involves repeated observations of the same variables over long periods of time — often many decades. It is a type of observational study. Longitudinal studies are often used in psychology to study developmental trends across the life span, and in sociology to study life events throughout lifetimes or generations. The reason for this is that unlike cross-sectional studies, in which different individuals with same characteristics are compared, longitudinal studies track the same people, and therefore the differences observed in those people are less likely to be the result of cultural differences across generations. Because of this benefit, longitudinal studies make observing changes more accurate, and they are applied in various other fields. In medicine, the design is used to uncover predictors of certain diseases. In advertising, the design is used to identify the changes that adverts have produced in the attitudes and behaviors of those within the target audience who have seen the advertising campaign.
Judgmental forecasting methods incorporate intuitive judgements, opinions and subjective probability estimates, such as Composite forecasts, Delphi method, Forecast by analogy, Scenario building, Statistical surveys and Technology forecasting.
Usage of forecasting can differ between areas of application: for example, in hydrology, the terms “forecast” and “forecasting” are sometimes reserved for estimates of values at certain specific future times, while the term “prediction” is used for more general estimates, such as the number of times floods will occur over a long period.
2.5: Steps to Creating a Marketing Plan
2.5.1: Defining the Vision
An organizational vision should be made up of two fundamental components: a core ideology and an envisioned future.
Examine the characteristics and purpose of corporate vision
- The core ideology defines the character of the organization, which should endure beyond any external or environmental trends and changes.
- The envisioned future should be laid out as a 10 to 30-year audacious goal with vivid descriptions that include the result of achieving that goal.
- If the organization in general, and its chief executive in particular, has a strong vision of where its future lies, then there is a good chance that the organization will achieve a strong position in its markets (and attain that future).
An ideal or a goal toward which one aspires.
- 5 Whys technique
The 5 Whys is a question-asking technique used to explore the cause-and-effect relationships underlying a particular problem. The primary goal of the technique is to determine the root cause of a defect or problem.
Perhaps the most important factor in successful marketing is the “corporate vision. ” Surprisingly, it is largely neglected by marketing textbooks, although not by the popular exponents of corporate strategy — indeed, it was perhaps the main theme of the book by Peters and Waterman, in the form of their “Super-ordinate Goals. ” . Corporate vision begins with a clear and concise understanding of who will buy the product or service produced by the company and what they want and need. It is paramount to defining the company’s vision and to creating a vision statement.
Vision statements are important because they set the stage for successful marketing strategies.
The bestselling book “In Search of Excellence” written by Tom Peters and Robert H. Waterman, Jr. states: “Nothing drives progress like the imagination. The idea precedes the deed. “
If the organization and particularly its chief executive have a strong vision of where its future lies, then it is likely they will achieve a strong position in its markets (and attain that future). This will not be trivial because its strategies will be consistent and will be supported by its staff at all levels.
For example, all of IBM’s marketing activities were underpinned by its philosophy of “customer service. ” This vision was originally promoted by the charismatic Watson dynasty. The emphasis at this stage is on obtaining a complete and accurate picture.
Characteristics of a Great Vision Statement
A great vision has the following characteristics:
- It is simple and idealistic, appealing to core values. These can be personal core values or a company’s core values.
- It is challenging but also realistic. A vision is usually expressed in a way as to appear far reaching, but people must feel like that it can, somehow, be achieved.
- It provides focus, serving as a guide when decisions have to be made.
- It provides clear benefits. If you want people to follow your vision, you’ll have to provide one in which they can invest (emotionally at first and actively later on).
One can find a lot of resources online and offline on how to write compelling vision statements. However, we’re much more interested in the process of crafting a vision. That introspective process that helps people and organizations alike to define a Vision.
In the 1996 Harvard Business Review article titled, “Building Your Company’s Vision,” authors James C. Collins and Jerry I. Porras, outlined a framework to define organizational vision, suggesting that it should be made up of two fundamental components: a core ideology and an envisioned future.
According to the authors, the core ideology defines the character of the organization, which should endure beyond any external or environmental trends and changes, while the envisioned future should be laid out as a 10 to 30-year audacious goal with vivid descriptions, including the result of achieving that goal.
The core ideology is made up of core values and a core purpose. These are the guiding principles and tenets of the organization and its most fundamental reason for being.
Core values are the enduring guiding principles of an organization. They are timeless and not necessarily expressed in the mission statement because the wording might change over time. Rather, the core values are the underlying ideology that remains constant. These guiding principles should be intrinsic to all members of the organization providing a common frame for everyone and do not require external justification (“this is why we do what we do”). They provide the internal motivation to stay the path and keep on going, even in spite of adverse external circumstances.
The core purpose of a company is it’s “raison d’tre”. It expresses the soul of the organization, usually through a mission statement. The core purpose should be expressed in a timeless and unattainable way. It should be a tantalizing objective, driving change and progress but never completely realized.
To uncover the organization’s true purpose, the authors suggest using the 5 Whys technique.
A vivid description should help all of us visualize a greener, brighter future resulting from the successful completion of the quest.
This description should enthuse and excite the listener. It should be passionate and emotional and should convey these feelings through its message. Business people tend to shy from conveying emotional messages about hopes and dreams, but that’s exactly how to motivate others. Great leaders know this and, as any student of rhetoric knows, have used it time and again throughout history to gather support around an idea or a course of action.
2.5.2: Defining the Business Mission
A mission statement provides a fundamental building block for the marketing plan, strategy, and communication to consumers.
Recognize the relevance of a mission statement when creating a marketing plan
- The strategies a business will use over a given time period to price, promote, produce, and distribute goods and/or services is called a marketing plan.
- A strong marketing strategy communicates the vision and mission in a way that differentiates from the competition to achieve a core competency reflective of internal strengths.
- As a result, a strong mission statement is a key ingredient to a strong marketing strategy. A mission statement acts as a guiding principle as to what the organization does, how it does it, and (most importantly) why.
- While mission statements are useful in providing direction and structure, they can often be unrealistic and idealistic.
- Marketing teams should use iterative testing to see how relevant and accurate a given mission is compared to the market needs.
- mission statement
A declaration of the overall goal or purpose of an organization.
A marketing plan describes the broad strategies a business will use over a given time period to price, promote, produce, and distribute goods and/or services. This marketing plan is a key strategic document that must line up cleanly with the other guiding principles of the organization. This includes the vision, mission, competitive environment, core competency, internal culture, and core consumer groups (target markets).
A strong marketing plan incorporates each of these key ingredients, creating a strategy that communicates the vision and mission in a way that differentiates from the competition to achieve a core competency reflective of internal strengths. This output should provide unique value that fills key needs for the target market.
The Mission Statement
Among these many inputs is the mission statement. A mission statement is defined as a guiding principle for the organization that describes why the company exists, how it hopes to achieve its objectives, and what those objectives are. Ideally, these three questions should be answered simultaneously in a few key sentences. It should be a statement that the whole organization can agree with, while also supporting a feasible and profitable mechanism of production.
A mission provides a few clear advantages, which explains why they are so common across larger commercial companies. A mission statement provides direction and clear purpose, which can be displayed both internally and externally to create alignment. By displaying publicly what the organization wants to accomplish, the company has a unique opportunity to manage expectations for potential employees and consumers.
On the other end of the spectrum, a clear mission statement can have some drawbacks as well. Most importantly among them is a sense of unrealistic expectation. Whenever a mission is stated on paper clearly and cleanly, there is always the risk that the description of a mission is more powerful than a realistic execution of that mission. For example, a non-profit organization may state that its mission is to provide clean water. In pursuing this goal, the organization may be successful in many ways.
However, there will always be more work to do, more places where water is needed, more pollution, and more obstacles. As the mission of the organization grapples with reality, it often begins to look idealistic or unrealistic. In these situations employees can become demotivated.
Mission and Marketing
While a full assessment of mission statements is unnecessary for this context, what’s important to keep in mind here is that a mission should guide the organization towards realistic and meaningful objectives. Communicating these objectives externally to the broader market is a central goal for the marketing team, and a significant portion of the marketing strategy.
When creating a marketing plan, the first two questions that need to be asked is what the organization is trying to accomplish and why consumers will care. A strong mission should bridge these two considerations perfectly, identifying and communicating to everyone (internal and external) why the organization does what it does. Once this is understood, a marketing plan should iterate on and refine the communication of this concept.
While it is true that the mission statement will play a big role in the initial marketing plan, it’s also worth noting that this is a two way street. Marketers will take the mission statement out into the public, communicating it in various ways to identify exactly what consumers might want and who they describe what they want. This should be an iterative feedback loop, where marketing is promoting a product or service, assessing success, discussing the goods with customers, and providing feedback to other teams. If marketing notices a mismatch between the mission and the consumers, the mission should be adapted accordingly. After all, organizations are justified by being relevant to those who consumer the output of the organization.
Marketing Feedback Loop
When discussing the broader organizational mission to users through a marketing plan, it’s useful to iterate how and what is said.
A marketing feedback loop – sell the improved product, assess progress (is it selling), ask customers if they like the new product, fix it, improve it, and make changes.
2.5.3: Conducting a Situational Analysis
Managers can use various methods of analysis to understand the firm’s own capabilities, customers, and business environment.
Outline the process and types of situational analysis methods
- The 5C analysis is considered to be the most useful and common method in analyzing the market environment due to the extensive information it provides to a business.
- A SWOT analysis is another method under the situation analysis that examines the Strengths and Weaknesses of a company (internal environment) as well as the Opportunities and Threats within the market (external environment).
- The Porter model involves scanning the environment for threats from competitors and identifying problems early on to minimize threats imposed by competitors.
- micro environment
Factors or elements in an organization’s immediate area of operations that affect its performance and decision making freedom. These factors include competitors, customers, distribution channels, suppliers, and the general public.
- 5C Analysis
the 5c analysis has allowed businesses to gain more information on the internal, macro-environmental and micro-environmental factors within the environment. The 5C analysis is considered to be the most useful and common method in analyzing the market environment due to the extensive information it provides to a business.
- When Starbucks first decided to expand, decisions were made on intuition. Once the company began to run into problems, it went back and conducted a detailed SWOT analysis. Its subsequent success arose from decisions based on this analysis.
A marketing plan guides businesses on how to communicate the benefits of their products to potential customers.
The situation analysis, the 2nd step in a marketing plan, is critical in establishing a long-term relationship with customers. Managers use it to analyze the internal and external environment of an organization and the firm’s own capabilities, customers, and business environment.
As described by the American Marketing Association, a situation analysis is “the systematic collection and study of past and present data to identify trends, forces, and conditions potentially to influence the performance of the business and to choose the appropriate strategies. “
The situation analysis consists of several methods of analysis: The 5Cs, SWOT and Porter’s five forces analyses.
A situation analysis is often referred to as a “3C analysis”, but when extended to a 5C analysis it allows businesses to gain more information about the internal, macro and micro-environmental factors within the environment.
The 5C analysis is considered the most useful, comprehensive and common way to analyze the market environment.
The 5Cs are:
Analysis of the company allows for evaluation of the company’s objectives, strategies, and capabilities which indicate the strength of the business model, if there are areas needing improvement, and how an organization will fit with the external environment.
In addition to company goals and objectives, it includes an analysis of the firm’s position, performance, and product line.
The competitor analysis takes into consideration the competitor’s position within the industry and the potential threat it may pose to other businesses. The main purpose of the competitor analysis is for businesses to analyze both the current and potential nature and capabilities of a competitor to be prepared to compete against them.
The competitor analysis looks at the following criteria: identity competitors, assessment of competitors, and future initiatives of competitors. The task of examining the competitor’s financial and marketing performance is one of the responsibilities of a market analyst. It includes the strengths and weaknesses, the anticipated response to the company’s marketing strategy, an analysis of growth and investment plans as well.
Customer analysis can be vast and complicated. Some companies conduct a PEST analysis which scans the external macro-environment in which the company operates. The important areas to analyze includes:
- Advertising most suitable for the demographic
- Market size and potential growth
- Customer wants and needs
- Motivation to buy the product
- Distribution channels (online, retail, and wholesale)
- Quantity and frequency of purchase
- Income level of customer
Collaborators are useful for businesses as they allow for an increase in the creation of ideas, as well as an increase in the likelihood of gaining more business opportunities.
Types of collaborators are:
Businesses must be able to identify whether the collaborator has the capabilities needed to help run the business as well as an analysis on the level of commitment needed for a collaborator-business relationship.
To fully understand the business climate, there are usually many different factors that can affect a business, and if researched well it will create a company that can respond well to change. An analysis on the climate is also known as the PEST analysis.
The types of climate that firms have to analyze are the:
- Political and regulatory environment
- Economic environment
- Social and cultural environment
- Technological environment
- Legislative environment
A SWOT analysis is another method under the situation analysis that examines the Strengths and Weaknesses of a company (internal environment) as well as the Opportunities and Threats within the market (external environment) .
A SWOT analysis can be a useful tool in conducting a situational analysis.
SWOT (strength, weakness, opportunity, threat) analysis is a useful tool that helps determine situational analysis as positive, negative, internal, and external.
A SWOT analysis looks at both current and future situations, where they analyze their current strengths and weaknesses while looking for future opportunities and threats. The goal is to build on strengths as much as possible while reducing weaknesses. A future threat can be a potential weakness while a future opportunity can be a potential strength.
This analysis helps a company come up with a plan that keeps it prepared for a number of potential scenarios.
Porter’s Five Forces Analysis
Porter five forces analysis is a framework for industry analysis and business strategy development. It draws upon industrial organization (IO) economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market. Strategy consultants occasionally use the five forces model to scan for and identify competitors to conduct qualitatively evaluate a firm’s strategic position. Ultimately, the primary purpose of the model is to help businesses compare and analyze their profitability and position at the line-of business, rather than industry group or industry sector level . It considers the following factors:
Threat of new entrants
Profitable markets that yield high returns will attract new firms. This results in many new entrants, which eventually will decrease profitability for all firms in the industry. Unless the entry of new firms can be blocked by incumbents, the abnormal profit rate will trend towards zero (perfect competition).
Bargaining power of buyers
The bargaining power of customers is also described as the market of outputs: the ability of customers to put the company under pressure, which also affects the customer’s sensitivity to price changes (e.g. firm can implement loyalty program to reduce customers’ buying power).
Bargaining power of suppliers
The bargaining power of suppliers is also described as the market of inputs. Suppliers of raw materials, components, labor, and services (such as expertise) to the company can be a source of power over the firm when there are few substitutes. Suppliers may refuse to work with the firm, or, charge excessively high prices for unique resources.
Threat of substitute product of services
The existence of products outside of the realm of the common product boundaries increases the propensity of customers to switch to alternatives. An example is the substitute of traditional phone with VoIP phone.
Rivals among existing competitors
For most industries, the intensity of competitive rivalry is the major determinant of the competitiveness of the industry.
2.5.4: Defining the Marketing Objectives
Marketing objectives should capture opportunities in the market while leveraging internal capabilities to achieve profitable outcomes.
Identify the anatomy of a good marketing objective, and recognize the importance of strong market research
- When defining the marketing objectives, organizations should take into account external marketing research. Models like the PESTEL framework are useful in measuring external forces.
- The audience and potential approaches to segmentation are critical aspects of the external environment. Determining target markets is a required input for a marketing objective.
- Understanding the organization’s vision and core competency is the next input to a strong marketing objective, which should represent what the organization stands for.
- Profitability is also a central input to marketing objectives. Objectives should be financially relevant and measurable. Business have to stay in business, after all.
- Coupling the internal competencies and vision with external forces in a profitable way is a strong starting point for creating good objectives.
- core competency
An organization’s unique capability to add value through internal strengths that are difficult to replicate by the competition.
Marketing plans have quite a few inputs and outputs; one of those outputs is the organization’s overall marketing objectives. Objectives are set later in the marketing plan development process, as they should be quantifiable and based off of comprehensive market research (another part of marketing plan development). The marketing objectives are, in a sense, the conclusions of a strong marketing plan development process, and should be agreed upon by all stakeholders.
Developing Marketing Objectives
The process of developing and defining marketing objectives has a few stages. As the marketing objectives themselves are a conclusions based on internal capabilities and external opportunities, identifying and understanding both is a required input.
From the economic landscape to the technological advancements in the industry, organizations must understand the needs, habits, influences, and barriers in the marketplaces. The PESTEL framework and Porter’s Five Forces are both useful models in measuring certain environmental factors. Marketing research should also include segmentation considerations, target markets, and a competitive analysis to determine positioning.
Porter’s Five Forces
Porter’s Five Forces are a few key industry measures that indicate the competitiveness and key considerations when operating in a given industry.
Porter’s Five Forces are a few key industry measures which indicate the competitiveness and key considerations when operating in a given industry.
A marketing plan is critical in aligning the organization’s vision with the communications and marketing materials that potential consumers and other stakeholders will receive. In short, the marketing objectives must take into account what the organization believes in, and what the organization is good at. Understanding internal strengths, and identifying external segments that would respond well to those strengths, is a good recipe for setting strong, profitable, and realistic objectives.
Finally, all marketing objectives should be financially quantifiable. This is to say that objectives should lead to results that generate profit for the organization (unless it is a non-profit, in which case objectives should maintain solvency). Marketing objectives should indicate the appropriate volume, margin, and subsequent financial impact of success (or failure). Ultimately, organizations have to stay in business. Marketing plays a key role in this.
Once the external environment, core competency, and financial requirements are clear and understood, the upper management team can begin refining precise marketing objectives that are realistic, profitable, aligned with the organization’s vision, and aligned with the expectations of key consumers. If a series of marketing objectives fulfills each of these requirements, they should be fairly effective at guiding the organization in the optimal direction.
2.5.5: Defining the Target Market
By understanding the behavioral, demographic, geographic, and psychographic details of a population, organizations can craft segmented target markets for products and services.
Outline the various factors that influence how an organization may segment a market into targeted groups
- When offering a product or service to the market, the standard marketing strategy is identifying key segments within the population of the market who are likely and willing to pay for the goods the organization is offering.
- The traditional way to segment a market is by using information about demographic, geographic, psychographic, and behavioral factors.
- Through iteration and filtering of the broader audience, an organization can refine their targeting and improve the efficiency of their marketing campaigns.
- Organizations have to balance the vision, mission, products, and services of the firm with the values, needs, and personalities in their target market.
A variation or alternative version.
When offering a product or service to the market, the standard marketing strategy is identifying key segments within the population of the market who are likely and willing to pay for the goods the organization is offering. This market segment will likely be the most cost-effective to advertise to, with the highest possible percentage converting to paying consumers.
To define the target market, you identify the broader market population and narrow that down utilizing various factors. This isolates the target market from the broader market.
A diagram that shows three circles (one large, medium, and small). The large circle represents that total available market, the medium circle is the served available market, and the small circle is the target audience. It indicates how to simplify the total available market to determine the target audience.
Defining the Target Market
Defining a target market is simply a process of narrowing down the broader total available market based upon specific metrics. Marketing professionals focus on asking the right questions and measuring the various factors and details of the consumer base in a process referred to as segmentation. Generally, there are four main characteristics of consumer groups that are traditionally used in defining the target market:
Perhaps the simplest of all target market metrics is geography. Where a consumer lives can include considerations such as climate, language, culture, and distribution.
Another common starting point for creating a target market are demographic considerations. These are simple profile facts about individuals, including gender, age, salary, career, education, and other commonly reported information about socio-economics.
A bit more complex than geographic and demographic considerations, psychographic concerns are intangible and often difficult to concretely define. These include attitudes, opinions, values, religion, tastes, and lifestyle.
Behavioral segmentation is all about past consumer behaviors. This is particularly useful for repeat customers and building brand loyalty. Consumers can be considered based on their frequency of purchase/consumption as well as their other purchasing behaviors (buying competitor products, or complementary goods).
By iterating and experimenting, organizations can refine their target market metrics and filters to optimize their marketing budget and get the best potential return on investment. Target marketing is all about understanding that no organization can be everything to everyone, and finding the perfect target group is strategically better than catering to everyone at once.
Organizations have to balance the vision, mission, products, and services of the firm with the values, needs, and personalities in their target market.
2.5.6: Creating a Marketing Mix
By profiling customers and determining goals and tactics, you can create a marketing mix that will help you succeed in building a strong customer base.
State the information to consider when deciding on a marketing mix
- The customer profile you create will help you make product, pricing, promotion, and placement decisions.
- Some marketing tactics are more expensive than others. Decide which ones are the most efficient considering your goals and your budget.
- Once you have created your customer profile and determined your goals and budget you’ll be able to make tactical decisions that will reach your customers throughout the entire life cycle of the product.
a customer’s perception of relative price (the cost to own and use) and performance (quality)
Of, or relating to tactics.
- It is important to know exactly what you want to achieve? If you want to get 50 new leads a month, you’re going to have to employ more aggressive tactics than if you only wanted to get 10 new leads a month.
Value is created by increasing benefits to the customers. For this reason, “benefits” is specified in the numerator of this equation (the higher the benefits, the higher the perceived value by the customer). On the other hand, “price” is placed in the denominator since the higher the price the lower the perceived value.
Now you must understand how value is created for your customers. To do so, managers use a technique called the “Marketing Mix” (commonly called the four P´s):
- Product: What is the product or satisfactor that best fulfills my customer’s needs?
- Price: What should be the appropriate price for this product that allows it to compete with other products in the same segment or substitute products?
- Place: In what markets should the company offer the product?
- Promotion: How should the company promote the product or satisfactor?
Creating the Right Marketing Mix
So now you know how value is created for your customer. But how do you juggle these elements to build a customer base? This isn’t an easy task, for sure, but following the three steps listed below wil get a business off to an excellent start.
Creating the Marketing Mix
To create a viable marketing mix, a company must how its customer, goals, and budget.
An illustration that shows what a company must consider in order to determine a viable marketing mix. A rain cloud (Mass media – radio, tv, OOH, PR) is over a woman (permission) holding an umbrella (attention). There’s a squirrel (digital) and bird (mobile) on the ground. On the side there’s an upward arrow (cost per impression) and a downward arrow (time to implement).
Profile Your Ideal Customers
Who is your customer? The customer profile you create will help you make product, pricing, promotion, and placement decisions.
Are you targeting consumers? Then create a customer profile which includes things like their age, income, and gender along with anything else that will help you define them.
Are you targeting businesses? Then create a customer profile that includes the type of business you’re targeting, its size, location, and who will be your main contact with them.
Determine Your Goals and Budget
What is it exactly that you want to achieve? If you want to get 50 new leads a month, you’re going to have to employ more aggressive tactics than if you only wanted to get 10 new leads a month.
Some marketing tactics are more expensive than others. Decide which ones are the most efficient considering your goals and your budget.
When looking at your goals and budget, remember that your decisions will also be based on where your product is in the product life cycle. If you have to educate your customers about the use and benefits of a product, you’re going to spend more than if you’re offering a new product in a well-established commodity category that simply sells at a lower price than its competitors.
Make Tactical Decisions
Once you have created your customer profile and determined your goals and budget, you’ll be able to make tactical decisions that will reach your customers throughout the entire life cycle of the product. The key is to choose a marketing mix that is efficient. In other words, it must reaches your customer and motivates them to buy, while at the same time stays within your budget.
Such choices can only be made once marketers have completed the first two steps.
2.5.7: Managing Strategy
To ensure that the marketing programs reach the objectives, marketers must focus on how to best implement the chosen strategy.
Identify the methods used to manage and implement marketing strategies
- After the firm identifies its strategic objectives, selects its target market, finalizes its desired positioning for the company, and determines its product or brand, marketing managers focus on how to best implement the chosen strategy.
- Effective execution may require management of both internal resources and a variety of external vendors and service providers.
- Marketing management therefore often makes use of various organizational control systems, such as sales forecasts, sales force and reseller incentive programs, sales force management systems, and customer relationship management tools (CRM).
- supply chain management
Supply chain management (SCM) is the management of a network of interconnected businesses involved in the provision of product and service packages required by the end customers in a supply chain.
- value proposition
The benefit (such as profit or convenience) offered by an organization’s product or service.
- The area of marketing agency management (i.e., working with external marketing agencies and suppliers) uses techniques such as agency performance evaluation, scope of work, incentive compensation, and storage of agency information in a supplier database.
After the firm identifies its strategic objectives, selects its target market, finalizes its desired positioning for the company, and determines its product or brand, marketing managers focus on how to best implement the chosen strategy.
Traditionally, this has involved implementation planning across the “4 Ps” of marketing: Product management, Pricing (at what price slot does a producer position a product, e.g., low, medium or high price), Place (i.e., sales and distribution channels; the place or area where the products are going to be sold, which could be local, regional, countrywide, or international), and Promotion.
Taken together, the company’s implementation choices across the 4 Ps are often described as the marketing mix, meaning the mix of elements the business will employ to “go to market” and execute the marketing strategy.
The overall goal for the marketing mix is to consistently deliver a compelling message that states the benefits derived from purchasing the product or service and why it is better than similar products that are for sale. It is this value proposition that reinforces the firm’s chosen positioning, builds customer loyalty and brand equity among target customers, and achieves the firm’s marketing and financial objectives.
In many cases, marketing management will develop a marketing plan to specify how the company will execute the chosen strategy and achieve the business’s objectives. The content of marketing plans varies from firm to firm, but commonly includes:
- An executive summary
- Situation analysis to summarize facts and insights gained from market research and marketing analysis
- The company’s mission statement or long-term strategic vision
- A statement of the company’s key objectives, often subdivided into marketing objectives and financial objectives
- The marketing strategy the business has chosen, specifying the target segments to be pursued and the competitive positioning to be achieved
- Implementation choices for each element of the marketing mix (the 4 Ps)
Project, Process, and Vendor Management
More broadly, marketing managers work to design and improve the effectiveness of core marketing processes, such as new product development, brand management, marketing communications, and pricing.
Marketers may employ the tools of business process reengineering to ensure these processes are properly designed, and use a variety of process management techniques to keep them operating smoothly.
Effective execution may require management of both internal resources and a variety of external vendors and service providers, such as the firm’s advertising agency.
Managing your marketing strategy might also mean managing external vendors such as advertising agencies.
Marketers may therefore coordinate with the company’s purchasing department on the procurement of these services. The area of marketing agency management (i.e., working with external marketing agencies and suppliers) uses techniques such as agency performance evaluation, scope of work, incentive compensation, RFXs, and storage of agency information in a supplier database.
Reporting, Measurement, Feedback and Control Systems
Marketing management employs a variety of metrics to measure progress against objectives. It is the responsibility of marketing managers – in the marketing department or elsewhere – to ensure that the execution of marketing programs achieves the desired objectives and does so in a cost-efficient manner.
Marketing management therefore often makes use of various organizational control systems, such as sales forecasts, sales force and reseller incentive programs, sales force management systems, and customer relationship management tools (CRM).
Recently, some software vendors have begun using the term “marketing operations management” or “marketing resource management” to describe systems that facilitate an integrated approach for controlling marketing resources. In some cases, these efforts may be linked to various supply chain management systems, such as enterprise resource planning (ERP), material requirements planning (MRP), efficient consumer response (ECR), and inventory management systems.