Ch4 Marketing Planning.docx

MODULE 4 : MARKETING PLANNING, SALES PROGRAMMES AND ACCOUNT MANAGEMENT POLICIES Marketing Planning Planning is deciding what to do in the presentto achieve what is desired in the future. It involves an analysis of where the organisation is and how it got there and a projection of where the organisation will end up if it continues to move in the same direction. Strategy is a statement of the fundamental pattern of present and planned objectives, resource deployments, and interactions with markets, competitors and other environmental factorsthat indicate how an organisation intends to survive and prosper over time. Tactics are detailed programmes that spell out how resources are to be alloocated and what actions are to be taken, by whom, and when. The Planning Process Company Mission and Goals A statement of an organisation’s mission attempts to answer the most basic questions about its reasons for being. The most appropriate way for a firm to define its mission is in terms of the broad human needs it will try to satisfy. When an organisation’s mission is defined in terms of a need, it becomes easier to identify attractive marketing opportunities. A clearly defined mission helps management evaluate available opportunities and avoid those that are inconsistent with the firm’s purpose. (ii) SBU Strategy In organisations with multiple divisions or strategic business units, each SBU is likely to have its own objectives and a distinct strategy for accomplishing them. The SBU’s competitive strategy will influence and constrain the marketing objectives, strategies, and functional programs – including the activities of the sales force. Various strategies pursued by SBUs could be classified as follows: Low Cost Differentiation Niche Prospector Defender Analyser Once a business has decided how it will compete in order to gain a sustainable competitive advantageover other firms, it must then decide where to compete, what specific product-markets or market segments to target. Generic Businress Strategies and their Implications for the Sales Force Low-cost Supplier Aggressive construction of efficient-scale facilities Vigorous pursuit of cost reductions from experience Tight cost and overhead control Associated usually with high relative market share Sales force Implications Servicing large current customers Pursuing large prospects Minimising costs Selling on the basis of price Usually assuming significant order-taking responsibilities Differentiation Creation of something perceived industrywide as being unique Priovides insulation against competitive rivalry because of brand loyalty and resulting lower sensitivity to price Sales force Implications Selling nonprice benefits Generating orders Providing high quality of customer service and responsiveness Possibly significant amount of prospecting if high growth industry Selecting customers based on low price sensitivity Usually requires a high quality sales force Niche Service of a particular target market, with each functional policy developed with its target market in mind Although market share in the industry might be low, the firm dominates a segment within the industry Sales force Implications To become experts in the operations and opportunities associated with the target markets Focusing customer attention on nonprice benefits and allocating selling time to the target market Prospector Attempt to pioneer in product/market development Offer a frequently changing product line and be willing to sacrifice short-term profits to gain a long term stronghold in their markets Sales force Implications Primary focus is on sales volume growth Territory management emphasizes customer penetration and prospecting Defender Offer a limited, stable product line to a predictable market Markets are generally in the late growth or early maturity phase of the lifecycle Emphasis is on low cost producer through high volume Sales force Implications Maintain the current customer base Very little prospecting for new customers is involved Customer service is emphasised along with greater account penetration Analyzer Choose high growth markets while holding onto substantial mature markets Analyzers are an intermediate type of firm They make fewer and slower product market changes than prospectors but are less committed to stability and efficiency than defenders Sales force Implications Must balance multiple roles : servicing existing customers, prospecting for new customers, uncovering new applications, holding onto distribution of mature products and supporting campaigns for new products Market Opportunity Analysis A market opportunity exists only when some human need is unsatisfied. However, an unsatisfied need represents a viable and attractive opportunity for a firm only if: The opportunity is consistent with the mission and objectives of the firm There are enough potential customers for the needed product or service so the total potential sales volume is, or will be, substantial. The firm has the necessary resources and expertise to capture an adequate share of the total market These estimates of market potential, company sales potential and sales forecasts are critical to the firm’s sales plans. They provide the basis for defining sales territories, deploying salespeople, and getting sales quotas. Market opportunities usually do not involve every consumer or organisational buyer in the market place. Market opportunities should be defined and marketing strategies developed – for specific target markets, which usually consist of only one or a few customer segments with relatively homogenous preferences and characteristics. (iv) Generate Strategies Strategy generation is a creative task. The key at this stage is to be as creative as possible – the idea is not to evaluate strategies but to generate them. (v) Select Strategies The criteria used to evaluate the most appropriate marketing strategy should be directly related to the objectives to be accomplished. However, the bets overall strategy may not be the best for any single objective. (vi) Programme Marketing Mix The firm’s strategic sales programme gives information about : The total amount to be spent on the total marketing effort Allocation of marketing expenditure to the elements of the marketing mix Allocation of resources and effort across the possible activities Review and Revision The various functional plans must be reviewed and integrated into a cohesive whole at the business unit and corporate level and any incompatibilities between the product manager’s plans and the business unit’s financial or production plans must be eliminated. Audit and Adjust Involves periodic comparisons of actual results with the sales volume, market share, expense budgets, and other objectives satisfied in the plan. Any deviations of specific results from planned levels need to be examined and appropriate corrective action taken by adjusting specific elements of the marketing mix, adopting a new marketing strategy or possibly reevaluating market opportunities. THE ROLE OF PERSONAL SELLING IN A FIRM’S MARKETING STRATEGY There are four basic types of promotional activities: Personal Selling Advertising Sales Promotion Publicity The Advantages of Personal Selling as a Promotional Tool Personal selling involves oral communication with a potential customer on a person-to-person basis. Because of direct face-to-face communication with a potential customer, the potential customer is more likely to feel obliged to pay attention to the sales representative’s message. As the sales rep communicates with only one potential customer at a time, the rep can tailor the message to fit the need and interests of the specific customer. Communication flows in both directions during a sales call. Immediate feedback received from the customer in the form of questions, objections, and non-verbal communications. The sales rep can communicate a larger amount of complex information than can be transmitted with other promotional tools. Demonstration of the product can be done and visual aids can be used. The rep, by virtue of the larger amount of time spent with the customer, can learn about the client’s problems or needs and educate the client about the appropriate products or services. Disadvantage: A sales rep can communicate only with a small number of potential customers. Thus, it is more costly per person reached than other promotional tools. Determinants of Personal Selling’s Appropriate Strategic Role Personal selling should play a substantial role in the firm’s marketing mix only when the communications tasks involved are performed better by face-to-face selling than any other method. The firm receives a greater profit return from the last (marginal) dollar invested in personal selling than it would by spending that dollar on any other part of the marketing programme or any other company activity. Each dollar spent on personal selling produces at least one dollar of marginal income. The appropriate amount of personal selling effort depends on: The business’ objectives, strategy and resources The target market Product characteristics Distribution policies Pricing policies Company Resources, Objectives and Marketing Strategy Although the costs per person reached are higher for personal selling, a successful personal selling effort may require a smaller total financial outlay than either an advertising or a sales promotion campaign. The high costs involved in extensive advertising advertising and sales promotion efforts limit their use by smaller firms. Such firms must often rely on personal selling – perhaps supplemented with less expensive local, regional or cooperative advertising as their primary promotional tool. The highly persuasive nature of personal selling makes it an appropriate business tool when the objective is to take market share away fgrom establishesd competitors, especially if the product is a relatively complex industrial or consumer durable good. If a firm is introducing a new product or an existing product in new markets, marketing objectives might be to stimulate primary demand andf to generate awareness of the product among potential customers, then media advertising and sales promotion are the best tools because they can communicate basic information about the product to many potential buyers with great efficiency. If the firm’s objective is to expand distribution by persuading more wholesalers or retailers to carry the product, then a strong personal selling effort and perhaps a trade promotion programme are indicated. Characteristics of the Target Market Personal selling is most often emphasized when: the target market contains relatively few customers the average customer is likely to place a relatively large order customers are clustered close together Firms selling to industrial markets with few potential customers, and those that distribute their products through a small number of wholesale intermediaries, commonly rely on personal selling as their promotional selling. Firms that selling to large, geographically dispersed, consumer markets place primary emphasis on the more cost-efficient advertising and sales promotion methods. Product Characteristics Promotional mixes for industrial goods concentrate heavily on personal selling; those for consumer durables \goods utilise a combination of personal selling and advertising and producers of non-durable consumer goods rely most heavily on advertising and sales promotion. This is because industrial goods and consumer durables tend to be more complex than nondurables, son potential buyers need more information to make a purchase decision. Also industrial goods are very often designed to meet the needs of individual customers, and consumer durables (as well as complex services, such as financial or insurance services) often present the buyer with a range of options. A company’s website can: Communicate large amounts of product information Generate leads for the firm’s field sales force to follow up Allow interested customers to bypass face-to-face contact with a salesperson and order the firm’s products electronically. Distribution Policies The importance of the salesforce’s role in building a distrib ution channel is influenced by the firm’s strategy for inducing resellers to buy its product. When a firm follows a Pull Strategy, it attempts to build strong customer demand for its brand. This encourages wholesalers and retailers to carry the product to satisfy their customers and reap the resulting sales and profits. A strong advertising programme is the key to such a strategy. When a firm uses a Push Strategy to build strong reseller support, it offers direct inducements to potential wholesalers and retailers to encourage them to stock the product. Various inducements that can be offered to resellers include : Development of “just in time” delivery and reorder programmes and logistical alliances Efficient customer response or category management programmes that help resellers improve their sales volumes and margins on the firm’s products Price promotions Volume discounts Contests for reseller’s sales people Training programmes Cooperative advertising programmes POP purchase materials The manufacturer’s salesforce plays a principal role in implementing a push strategy. The salesforce must explain the advantages of carrying and promoting the supplier’s products to prospective channel members, persuade them to stock and aggressively merchandise those products and maintain cooperative relationships with the firm’s channel partners over time. Pricing Policies Expensive products like industrial goods and consumer durables typically require substantial amounts of personal selling as they are technically or aesthetically sophisticated and customers receive substantial amounts of personal selling. Personal selling price is essential in marketing products or services where the ultimate selling price is open to negotiation. Negotiated selling prices are commonly found in cases of industrial goods and services and also in some consumer durables. Advertising is relatively important when: Large number of customers Buyer’s information needs are low Size and importance of purchases is small Little post-purchase service is required Low product complexity Pull strategy for distribution Pre-set pricing policy Many resources available for promotion Personal selling is relatively important when: Small number of customers Buyer’s information needs are high Size and importance of purchases is large Much post-purchase service is required High product complexity Push strategy for distribution Negotiated pricing policies Few resources available for promotion ADVERTISING Non personal communication the organisation pays to have transmitted to a target audience through a mass medium, such as TV, radio, newspapers, magazines, direct mail, transit cards, billboards, catalogues or directories. SALES PROMOTION Activities and materials that induce potential customers to purchase the firm’s product or service, usually by drawing the customer’s attention to the product or by offering an added incentive for purchase. Sales promotion methods are usually classified into two types based on the audience towardwhich they are dircted. Consumer sales promotion activities are designed to produce short-run sales increases among ultimate customers by offering such things as “cents off” coupons, free samples and contests. Trade sales promtion activities encourage wholesalers or retailers to stock and aggressively market the firm’s product by offering such things as quantity discounts, free goods, display materials and sales contests. PUBLICITY Nonpersonal communication of information about a firm or its products is transmitted through a mass medium at no charge to the firm. Examples : Magazines, newspaper, radio or television news stories about new pproducts, new stores or pe4rsonnel, or policy changes in an organisation. ACCOUNT MANAGEMENT POLICIES Account management policies specify which individuals within each type of customer organisation the salesperson should attempt to contact, what kinds of selling and service activities should be engaged in, and how these individuals within each type of customer organisation the salesperson should attempt to contact, what kinds of selling and service activities should engaged in, and how those activities should be conducted. Some companies have explicit policies concerning such things as: whether salespeople should work through customer’s purchasing departments or attempt to call directly on higher level decision makers the amount of effort and detail to be included in preparing the proposals for different types of accounts the kinds of information to be reported back to the home office after a sales call. THE ACCOUNT MANAGEMENT PLANNING PROCESS marketing objectives, strategy and company constraints estimates of sales potential; forecasts based on marketing information systems plan allocation of effort across accounts sales force organisation sales force size territory design classification of accounts plan allocation of effort across members of the buying centre within each account plan selling activities : type and content of sales presentation sales call follow-up and customer service call reports and other information The maturing of many industries and the increased concentration of those industries due to mergers and acquisitions is prompting many firms to focus more of their marketing and sales efforts on satisfying, retaining an d winning increased sales from established accounts. Sales to established customers are usually less costly to obtain, and therefore more profitable than sales to new accounts. As many industries mature and as more global competitors enter regional markets, competition for available sales dollars is intensifying. POLICIES CONCERNING MAJOR OR KEY ACCOUNTS Maintaining Relationships with Major Accounts The major account management selling philosophy stresses the dual goals of making sales and developing long-term relationships with large customers. The salesperson can provide expert advice and counsel to the customer, including advice on the engineering, design and installation of complete product systems. System Selling Sellers are engaging in systems selling more frequently as one way to provide better service and satisfaction to major customers. Systems selling involves two components : the design of well-integrated groups of interlocking products the implementation of a system of production, inventory control, distribution and other services to meet a major customer’s needs for a smooth-running operation. Computerised Ordering and Customer Alliances To further strengthen relationships with major customers after an initial sale has been made, firms are forming logistical alliances with those customers involving the development of joint information and reorder systems. Improving Postsale Customer Service and Loyalty Loyal customers tend to: tend to concentrate their purchases, thus leading larger volumes and lower sellin g and distribution costs provide positive word-of-mouth and customer referrals may be willing to pay premium prices for the value they receive Periodic measurement of customer satisfaction is important because a dissatisfied customer is unlikely to remain loyal to a company over time. However, customers who describe themselves as satisfied are not necessarily loyal. Thus, satisfaction measures shouls be supplemented with examinations of customer behaviour, such as measures of annual retention rate, frequency of purchases, and the percentage of a customer’s total purchases captured by the firm. Thus, major account policies often emphasise activities to be performed by the salesperson after a sale has been made. These activities typically include such routine servicing as expediting credit approval and delivery. They can also include more extensive service where the salesperson acts as the customer’s representative to the selling company and attempts to ensure that the company is adequately meeting the needs of the buyer. As major account management requires that a salesperson devote almost constant attention to the needs of a single customer, firms that use this approach typically have two separate salesforces : one that calls on smaller customers and one that is a force of account managers who devote all their time to one or a few major accounts. Major Account Teams Some national accounts are so large and important that a firm may assign a team of representatives consisting of people from various functional departments of the company to a single customer. The sales team may include representatives from different levels in the company’s management hierarchy. Each deals with purchase influencers and decision makers at corresponding levels in the customer’s organisation.