Strategic Marketing Planning: Theory and Practice1Malcolm McDonald 2, Cranfield University School of ManagementIn order to explore the complexities of developing a strategic marketing plan, thisarticle is written in three parts.The first describes the strategic marketing planning process itself and the key stepswithin it. It also deals with implementation issues and barriers to marketing planning.The second part provides guidelines for the marketer which will ensure that theinput to the marketing plan is customer focused and considers the strategic dimensionof all of the relationships the organization has with its business environment.The third part provides a brief overview of a process for assessing whether thestrategic marketing plan creates or destroys shareholder value, having taken account ofthe risks associated with the plan, the time value of money and the cost of capital. Italso outlines other metrics for measuring the effectiveness of the marketing strategy.Keywords: strategic marketing, planning, world class, success factor, marketingaccountabilityIntroductionResearch into the efficacy of formalised marketing planning (Thompson1962; Leighton 1966; Kollatt et al. 1972; Ansoff 1977; McDonald 1984;Greenley 1984; Piercy 1997; Smith 2003) has shown that marketingplanning can make a significant contribution to commercial success. Themain effects within organizations are: the systematic identification of emerging opportunities andthreatspreparedness to meet changethe specification of sustainable competitive advantageimproved communication among executivesreduction of conflicts between individuals and departmentsthe involvement of all levels of management in the planningprocessmore appropriate allocation of scarce resourcesconsistency of approach across the organizationa more market-focused orientation across the organization1This article is Malcolm McDonald, 2006, and is used under licence. It alsoappears as a chapter in the forthcoming book: Baker, M. J. and Hart, S. (Eds) TheMarketing Book, 6th edn, (Oxford: Butterworth-Heinemann), and is reproduced withtheir permission.2Correspondence: Professor Malcolm McDonald, Cranfield School of Management,Cranfield University, Cranfield, Bedford, MK43 0ALThe Marketing Review, 2006, 6, 375-418ISSN1469-347X print / ISSN 1472-1384 online Westburn Publishers Ltd.
376The Marketing Review, 2006, 4, 375-418However; although it can bring many benefits, a strategic marketing plan ismainly concerned with competitive advantage – that is to say, establishing,building, defending and maintaining it.In order to be realistic, it must take into account the organization’sexisting competitive position, where it wants to be in the future, itscapabilities and the competitive environment it faces. This means that themarketing planner must learn to use the various available processes andtechniques which help to make sense of external trends, and to understandthe organization’s traditional ways of responding to these.However, this poses the problem regarding which are the mostrelevant and useful tools and techniques, for each has strengths andweaknesses and no individual concept or technique can satisfactorilydescribe and illuminate the whole picture. As with a jigsaw puzzle, a senseof unity only emerges as the various pieces are connected together.The links between strategy and performance have been the subject ofdetailed statistical analysis by the Strategic Planning Institute. The PIMS(Profit Impact of Market Strategy) project identified from 2600 businesses,six major links (Buzzell 1987). From this analysis, principles have beenderived for the selection of different strategies according to industry type,market conditions and the competitive position of the company.However, not all observers are prepared to take these conclusions atface value. Like strategy consultants Lubatkin and Pitts (1985), who believethat all businesses are unique, they are suspicious that something as criticalas competitive advantage can be the outcome of a few specific formulae.For them, the PIMS perspective is too mechanistic and glosses over thecomplex managerial and organizational problems which beset mostbusinesses.What is agreed, however, is that strategic marketing planningpresents a useful process by which an organization formulates its strategies,providing it is adapted to the organization and its environment.Positioning Marketing Planning with MarketingIndeed, Smith’s PhD thesis (2003) proved a direct link betweenorganisational success and marketing strategies that conform to whatprevious scholars have agreed constitutes strategy quality, which was shownto be independent of variables such as size, sector, market conditions andso on.This thesis linked superior performance to strategies with thefollowing qualities:1. Homogenous market segment definition2. Segment specific propositions3. Strategy uniqueness4. Strength leverage and weakness minimisation5. Creation of internal and external synergies6. Provision of tactical guidance7. Alignment to objectives8. Alignment to market trends9. Appropriate resourcing10.Clear basis of competition
Strategic Marketing Planning: Theory and Practice 377Let us first, however, position strategic marketing planning firmly within thecontext of marketing itself.As can be deduced from Chapter 1, marketing is a process for:defining markets; quantifying the needs of the customer groups (segments)within these markets; determining the value propositions to meet theseneeds; communicating these value propositions to all those people in theorganization responsible for delivering them and getting their buy-in totheir role; playing an appropriate part in delivering these value propositionsto the chosen market segments; monitoring the value actually delivered.For this process to be effective, we have also seen that organizationsneed to be consumer/customer-driven.A map of this process is shown below. This process is clearly cyclical,in that monitoring the value delivered will update the organization’sunderstanding of the value that is required by its customers. The cycle ispredominantly an annual one, with a marketing plan documenting theoutput from the ‘understand value’ and ‘determine value proposition’processes, but equally changes throughout the year may involve fastiterations around the cycle to respond to particular opportunities orproblems.It is well known that not all of the value proposition deliveringprocesses will be under the control of the marketing department, whoserole varies considerably between organizations.Define markets& gure 1. Map of the Marketing ProcessDeterminevalueProposition
378The Marketing Review, 2006, 4, 375-418The marketing department is likely to be responsible for the first twoprocesses, ‘Understand value’ and ‘Determine value proposition’, althougheven these need to involve numerous functions, albeit co-ordinated byspecialist marketing personnel. The ‘Deliver value’ process is the role of thewhole company, including, for example, product development,manufacturing, purchasing, sales promotion, direct mail, distribution, salesand customer service. The marketing department will also be responsible formonitoring the effectiveness of the value delivered.The various choices made during this marketing process areconstrained and informed not just by the outside world, but also by theorganization’s asset base. Whereas an efficient new factory with much sparecapacity might underpin a growth strategy in a particular market, a factoryrunning at full capacity would cause more reflection on whether priceshould be used to control demand, unless the potential demand warrantedfurther capital investment. As well as physical assets, choices may beinfluenced by financial, human resources, brand and informationtechnology assets, to name just a few.Thus, it can be seen that the first two boxes are concerned withstrategic marketing planning processes (in other words, developing marketstrategies), whilst the third and fourth boxes are concerned with the actualdelivery in the market of what was planned and then measuring the effect.Input to this process will commonly include: The corporate mission and objectives, which will determinewhich particular markets are of interestExternal data such as market researchInternal data which flow from ongoing operationsAlso, it is necessary to define the markets the organization is in, or wishes tobe in, and how these divide into segments of customers with similar needs.The importance of doing this correctly was emphasised earlier in thereference to Smith’s 2003 PhD. The choice of markets will be influenced bythe corporate objectives as well as the asset base. Information will becollected about the markets, such as the market’s size and growth, withestimates for the future.The map is inherently cross-functional. ‘Deliver value proposition’, forexample, involves every aspect of the organization, from new productdevelopment through inbound logistics and production to outboundlogistics and customer service.The map represents best practice, not common practice. Many aspectsof the map are not explicitly addressed by well-embedded processes, even insophisticated companies.Also, the map is changing. One-to-one communications andprinciples of relationship marketing demand a radically different salesprocess from that traditionally practised. Hence exploiting new media suchas the Internet requires a substantial shift in thinking, not just changes to ITand hard processes. An example is illuminating. Marketing managers at onecompany related to us their early experience with a website which wasenabling them to reach new customers considerably more cost-effectivelythan their traditional sales force. When the website was first launched,
Strategic Marketing Planning: Theory and Practice 379potential customers were finding the company on the Web, deciding theproducts were appropriate on the basis of the website, and sending an email to ask to buy. So far so good. But stuck in a traditional model of thesales process, the company would allocate the ‘lead’ to a salesperson, whowould phone up and make an appointment perhaps three weeks’ hence.The customer would by now probably have moved on to another onlinesupplier who could sell the product today, but those that remained weresubjected to a sales pitch which was totally unnecessary, the customerhaving already decided to buy. Those that were not put off would proceedto be registered as able to buy over the Web, but the company had lost theopportunity to improve its margins by using the sales force more judiciously.In time the company realised its mistake: unlike those prospects which thecompany identified and contacted, which might indeed need ‘selling’ to,many new Web customers were initiating the dialogue themselves, andsimply required the company to respond effectively and rapidly. The salesforce was increasingly freed up to concentrate on major clients and onrelationship building.Having put marketing planning into the context of marketing andother corporate functions, we can now turn specifically to the marketingplanning process, how it should be done and what the barriers are to doingit effectively. We are, of course, referring specifically to the second box inFigure 1.The Marketing Planning ProcessMost managers accept that some kind of procedure for marketing planningis necessary. Accordingly they need a system which will help them to thinkin a structured way and also make explicit their intuitive economic models ofthe business. Unfortunately, very few companies have planning systemswhich possess these characteristics. However, those that do tend to follow asimilar pattern of steps.Figure 2 illustrates the several stages that have to be gone through inorder to arrive at a marketing plan. This illustrates the difference betweenthe process of marketing planning and the actual plan itself, which is theoutput of the process, which is discussed later in this chapterEach of the process stages illustrated in Figure 2 will be discussed inmore detail in this article. The dotted lines joining up stages 5–8 are meantto indicate the reality of the planning process, in that it is likely that each ofthese steps will have to be gone through more than once before finalprogrammes can be written.How Formal Should this Process Be?Although research has shown these marketing planning steps to beuniversally applicable, the degree to which each of the separate steps in thediagram needs to be formalized depends to a large extent on the size andnature of the company. For example, an undiversified company generallyuses less formalized procedures, since top management tends to havegreater functional knowledge and expertise than subordinates, and becausethe lack of diversity of operations enables direct control to be exercised over
380The Marketing Review, 2006, 4, 375-418most of the key determinants of success. Thus, situation reviews, the settingof marketing objectives, and so on, are not always made explicit in writing,although these steps have to be gone through.In contrast, in a diversified company, it is usually not possible for topmanagement to have greater functional knowledge and expertise thansubordinate management, hence planning tends to be more formalized inorder to provide a consistent discipline for those who have to make thedecisions throughout the organization.Either way, there is now a substantial body of evidence to show thatformalized planning procedures generally result in greater profitability andstability in the long term and also help to reduce friction and operationaldifficulties within organizations.Johnson and Bailey’s (2000) typology of the different styles of planningwent some way to throwing light on the actual degree of formalisation ofmarketing planning processes, although Smith’s 2003 thesis reduced theseto three - visionary process