Sunday, December 15, 2013

A Strategic Marketing Planning Tool


Over the years the leading marketing and management thinkers have developed theories that look for answers as to why companies failed after enjoying a period of tremendous success.



Theodore Levitt attributed failures to the leaders of these companies being myopic and defining their business mission too narrowly. For example, railroads considering themselves as being in the railroad business rather than the transportation business was myopic and prevented them from entering into air transportation, shipping and trucking.



Clayton Christensen developed the theories on disruptive innovations and suggested that, over time, industry-leading companies continued developing product enhancements that were driven by the most demanding and profitable customers. As a result a significant portion of customers not wanting or needing all of the product enhancements were vulnerable to attack from new companies offering less expensive, “good enough” product alternatives.



W. Chan Kim and Renee Mauborgne developed theories suggesting that “blue oceans” of opportunities existed within the traditional competitive business environment. These “blue oceans” provide opportunities for new companies to enter the market in a way that is protected from existing market participants.



All three theories are correct and are overlapping. An industry leader that begins to lose market share to new market entrants may have defined the scope of business too narrowly, focused too much on the most profitable customers or left identifiable market opportunities unidentified. In fact, it is probably a combination all of these factors that cause a company to become stagnant and ultimately begin to fail.

Recognition of the need for a broader marketing strategic planning effort is the first step in developing an on going strategic marketing process that can keep a company at the leading edge of its industry.

This process begins with a situation analysis that assesses the state of the market place, the industry and the strengths, weaknesses, opportunities and threats that affect the company as well as its competition.

After the situation analysis there should be an assessment of the vision of the company. Are there occurrences that would suggest that the company’s vision is too narrow? In the newspaper industry the occurrence of digital delivery of news and classified advertising might have suggested that newspapers were in the information distribution business.

Further, if newspapers had taken a different view of niche, free distribution news products, there might have been a realization that a “good enough” product was attracting their least profitable customers. This would be an indication that a market disruption was possible.

Finally, a “blue ocean” strategy canvas might have revealed opportunities that resulted in new businesses such as on-line searchable classified ads. This could have been an opportunity for newspapers as well as companies like Craig’s List.

Using all three of the theoretical approaches provides better insights and a grid can be developed to develop strategic actions for price, place, product and promotion and assess the needed requirements for the workforce, cash requirements, operational procedures and capital expenditures. This process can also identify potential gateways that can allow a transition from the current mode of operations to a new business scenario.

An Example

To demonstrate how to use this process, I will use a regional newspaper as the industry leader in a rapidly changing market place to develop a possible marketing strategy.

SITUATION ANALYSIS WORKSHEET

   Industry –
1.    Changing to digital access
2.    Old model of ad value changing
3.    More focus on custom advertising
4.    Print revenue losses not replaced by Internet revenues
5.    Print and deliver model has high variable and fixed costs
6.    Significant number of readers and advertisers prefer print and deliver model for news, advertising and preprints
7.    Consolidation/reduction of workforce due to technology.
8.    Technology is continuing to be more sophisticated and less expensive.
  
   Market –
1.    Numerous suburban newspapers have high readership in their community
2.    Internet is increasingly the preferred choice to obtain news and information
3.    Population and economic growth is highest in the suburbs
    4.   Suburbs attract younger professionals that are less likely to prefer printed newspaper

   SWOT ANALYSIS

1.    Strengths - reputation, wide distribution network, corporate resources, local and regional news coverage.
2.    Weaknesses – print product cost structure, low penetration in markets with strong suburban newspapers.
3.    Opportunities  - Digital market growth, desire for relevant information, new technology developments and cost reductions, increase in availability of customized Internet application.
4.    Threats – competition with smaller, more productive staffs, rapid growth of population and retailers in suburbs, decline in print audiences.

POTENTIAL DISRUPTIONS

1.    Low cost cell phones with limited capabilities and no contracts
2.    Digital preprints
3.    Independent journalists covering specialty news and distributing digitally
4.    Digital ad agencies to place ads for all formats.

BLUE OCEAN STRATEGY CANVAS








Strategy Worksheet

Based on the series of analyses above, a strategist can begin to develop a strategy spreadsheet for Price, Place, Product and Promotion. measured against the impact on the organization’s workforce, cash requirements, operational procedures and capital equipment requirements.

Based on the above analysis, strategies that might be considers are:

PRODUCT – Focus on local and regional news coverage, develop products for conversion of print products to digital products including digital preprints, develop customized news and information delivery capabilities and software applications. Develop classified free digital classified ads with a print upgrade.

Price – Low cost for all digital products and cost based pricing for print products. Preprint delivery would be priced to compete with “marriage mail” products. Create "value pockets" that match provide customized information for readers and serve as high value customer groupings for advertisers.

Place – Print products delivered with long-term plan to convert to digital delivery. Preprint delivery would be by news carrier or post office with long-term plan to convert to digital delivery.

Promotion – Emphasize local news and shopping information, original content, and classified ads with impact. For advertisers, emphasize low cost per reach.

Since each strategic move has implications for the organization, each of the strategies considered should be measured against the impact on the organization as shown in the chart below.

ORGANIZATIONAL IMPACT CHART


PRODUCT -
PRICE
PLACE
PROMOTION
WORKFORCE
Content stringers, mixed with employees for content. Internal sales staff.

High productivity for staff through technology
Outsource and contract for printing and distribution.
Internal brand manager. Outsource ad campaigns.
CASH REQUIREMENTS
Minimize fixed expenses for facilities etc.
Cash flows maximized
Distribution costs below revenues.
Utilize efficient promotions but have constant market pressure
OP. PROCEDURES
High use of technology and outsourcing
High use of technology and outsourcing
High use of technology and outsourcing
High use of technology and outsourcing

CAP. EQUIP. REQUIREMENTS

Outsource software development and lease equipment.
Outsource software development and lease equipment.
Outsource software development and lease equipment.
Outsource software development and lease equipment.


Copyright GWR Research 2013

At this point the strategist has a pretty good feel for what is needed to begin considering tactics. The tactics will describe how each action and organizational implication will be addressed specifically. The result will be a comprehensive plan the can then be converted into a budget.

As a marketing strategy is developed it is important to recognize that individual elements of the strategy do not stand-alone. Price, place, product and promotion are interconnected. Price can affect the image of the product and the organization and influence the nature of the promotion. Promotion can affect the price, the product and the mode of distribution.
As each of the four Ps has an impact on the others, they have an impact on cash flow requirements, management systems, workforce requirements and capital equipment.

It is important that the process take place in the sequence described above and that the original vision and mission set the parameters for all actions. If strategy development does not follow a disciplined approach, there is a chance that the outcomes hoped for by the organization’s leaders will not be realized.