3.18 Marketing Planning

Question 1

Situational analysis should cover five main areas

Answer 1

1. Current product analysis (not needed for new businesses)
2. Target market analysis - important features of consumer profiles, establishing whether it is a mass or segmented market, finding out consumers’perceptions to the company’s existing products.
3. Competitor analysis - main competitors, strengths and weaknesses of their marketing mix, likely future competitors.
4. economic and political environment - a PEST analysis
5. a SWOT analysis - i) internal attributes of the business, ii) external environment (the opportunities and threats)

Question 2

Drawbacks of situational analysis

Answer 2

• time consuming
• require extensive market research
• detailed analysis of quantitative data
• (enter new markets) data might be quite difficult to obtain

Question 3

Benefits of situational analysis

Answer 3

• up-to-date strategies

- direct business

Question 4

Marketing objectives

Answer 4

• Specific, measurable, time limited

Question 5

Marketing Budget

Answer 5

Sets out how much money is allocated to the marketing function and how it is intended to spend it.

Question 6

Size of the marketing budget can be determined

Answer 6

• According to the marketing objectives (e.g. what management expect they need to spend to achieve the objectives)
• In line with market and competitor averages (e.g. some as a proportion of revenues)
• Based on the previous year, adjusted for known changes in the marketing programme

Question 7

Element of contingency (safety buffer) in marketing budget

Answer 7

(Allow the business to respond to unexpected events or opportunities)

1. The financial position of the business
2. Competitor actions
3. The demand for, and price of marketing services
4. The responsiveness and returns from marketing spending

Question 8

1. The financial position of the business

Answer 8

This is a fundamental issue. A business suffering from cash flow problems or low profitability will normally have to restrict its marketing budget along with cost reductions in other functional areas

Question 9

2. Competitor actions

Answer 9

A business whose competitors are significantly increasing their marketing spending may need to respond in order to maintain market share.

Question 10

3. The demand for, and price of marketing services

Answer 10

The budget needs to take account of the cost of marketing activities. For example, the economic slowdown in 2008/09 in the UK significantly reduced the cost of advertising on traditional media like television and newspapers because there was a reduction in demand (advertisers also started switching budgets to online campaigns too).

Question 11

4. The responsiveness and returns from marketing spending

Answer 11

This is often hard to measure – but important if it can be. Each element of marketing spending needs to generate an acceptable return. In many traditional forms of advertising this has proved difficult. However, online marketing and direct marketing are now much more sophisticated and it is possible to track and measure the financial returns.

Question 12

Sales forecasting

Answer 12

Predicting future sales levels and sales trends. It is a quantitative technique that aims to anticipate a business’s level of sales at a particular future time period.

Question 13

Potential benefits of sales forecasting

Answer 13

If marketing managers were able to predict the future accurately, the risks of business operations would be much reduced. If a precise forecast of monthly sales over the next two years could be made, the benefits to the whole organisation would be immense:

• The production department would know how many units to produce and what quantity of materials to order and would hold the correct level of stocks.
• The marketing department would be aware of how many products to distribute and whether changes to the existing marketing mix were needed to increase sales.
• Human resources workforce plan would be more accurate, leading to the appropriate level of staffing.
• Finance could plan cash flows with much greater accuracy.

Question 14

Problems of Sales Forecasting

Answer 14

Attempting to predict the future is a difficult thing. This is mainly that there are so many different variables that could change. The further into the future forecasting tries to extrapolate, the greater the degree of likely error.

• Inaccuracy of predictions: Attempts to look into the future are speculative and often the forecasters biases and subjectivity can be influential in determining the result. For example, a manager who would like to keep staffing costs down may choose a lower estimate of forecast sales to justify to staff lower wage rises.
• Limited information: Sales forecasting is an estimated prediction based on trends in past data. Estimates are only as good as the quality of the data and information available at the time.
• External influences: There are so many factors outside of a firm’s control that can influence sales at any time. The economy may suddenly boom benefiting all, the exchange rate may rise hurting exporting firms, or a competitor may launch a great new product and capture market share. The external environment can be significant.

Question 15

Trend

Answer 15

Underlying movement of the data in a time series.

Question 16

Seasonal variations

Answer 16

Regular and repeated variations that occur in sales data within a period of 12 months or less.

Question 17

Cyclical variations

Answer 17

Variations in sales occurring over periods of time of much more than a year – they are related to the business cycle.

Question 18

Random variations

Answer 18

May occur at any time and will cause unusual and unpredictable sales figures, e.g. exceptionally poor weather or negative public image following a high profile product failure.