4.2 Marketing planning 

Full video class on YouTube, summary and notes on Instagram, class extracts on TikTok, text below. Have fun!

The main point of this class is to continue learning the basics of marketing, particularly how to decide who to sell to and how to stand out among competitors.

Marketing planning will only make sense to you if you understand business objectives well. If you do not remember the relationship of goals, objectives, strategies and tactics (GOST) or if you don’t remember what SMART objectives are, then please review class 1.3 and then come back here. If you feel like you understand business objectives like a boss, then continue reading.

Marketing planning is the process of setting marketing objectives and determining marketing strategies for their achievement. It is no different from any other planning, it’s just that it’s about marketing this time. Once marketing objectives and strategies are determined, they need to be recorded in a document that could act as a guide to decision-making. This document is called (surprise-surprise!) marketing plan. In addition to marketing objectives and strategies, it also includes marketing mix (4Ps or 7Ps), market research methods, segmentation & targeting methods, positioning, budgeting, control tools, auditing, and other things that we will discuss in detail later in Unit 4.

Marketing planning is a systematic, cyclical, reflective process of setting and resetting marketing objectives and strategies for their achievement. It’s not a one-off thing that you do only once when you set up an organisation. For maximum efficiency, it has to be cyclical, repetitive and reflective process that can facilitate the marketing success. That is why, marketing planning includes a series of activities that take turns one after another that are also referred to as marketing cycle. Marketing cycle — a series of reflective actions that organisations go through to maintain the reflective nature of marketing and its maximum efficiency. The picture below outlines which steps most organisations go through in their marketing cycle.

So, once we established that marketing planning is a reflective cyclical process, let’s discuss its importance. As you hopefully remember from the previous classes, discussing something’s importance basically means considering its advantages and disadvantages. This time will not be an exception, so here we go.

On the one hand, marketing planning (same as any other kind of planning) reduces risks: the more you’ve planned, the more prepared to changes you are. In addition, it fosters interdependence: all business functions are related, so a good marketing plan will take account of all the functional departments of organisations and will ensure their collaboration. Lastly, marketing planning motivates staff: once you have a plan that includes objectives and strategies, you know what to do and you are very much likely to be trying to work towards achieving these objectives.

However, on the other hand, marketing planning does not guarantee success: regardless of how hard and thoroughly organisation plans, there will definitely be some unforeseen changes. I doubt there is any organisation that was planning to operate under covid lockdowns and restrictions, but covid and lockdowns happened anyway. In addition, marketing planning is time-consuming and costly: it might be quite easy to plan if you are a sole trader, but once you put yourself into a large multinational company’s shoes, marketing planning might look like a big challenge. And lastly, marketing planning (same as any other kind of planning) bureaucratises organisations: if there is a plan, there has to be someone who makes sure that it is being followed and that there are certain procedures in place, as per the plan. So, very often it might add paperwork and more accountability if there are too many plans to design and follow.

Overall, in order to avoid the situation when marketing planning results in demotivation, it has to be a reflective and cyclical exercise that is flexible enough not to ruin the established structure and relationships by over-formalising communication and organisational culture.

Let’s starts with a quick brain exercise. Let’s call it “dividing the market”.

1. Think of a product you want to sell and of your potential customers.
2. Outline some criteria for dividing your potential customers (age, gender, or whatever else is relevant to your product).
3. Under each criterion, divide customers into groups, making sure that division into groups is relevant to your product. For example, if your product is a video game console and one of the criteria for dividing customers is age, then it would make sense to divide the potential users of your console into children, teenagers, adults and old people.
4. Within each criterion, select the group that you want to sell to.
5. Write a description of an ideal customer, based on the steps above.

Fill in the table below and keep it somewhere, we’ll get back to it in a moment.

Market segmentation is the process of dividing potential customers into groups with similar characteristics. That is what you did in steps 2 and 3 of the “dividing the market” exercise. Market segment is a group of customers with similar characteristics.

There are three main ways of market segmentation, i.e. three main ways how to divide customers. Demographic segmentation is a process of dividing the market (customers/consumers/users) by age, gender, ethnicity, marital status and other demographic characteristics. Geographic segmentation is a process of dividing the potential market by continent, country, region, province, climate zone, etc. And lastly, psychographic segmentation is a process of dividing the market by people’s lifestyles, hobbies, wealth, “class” (middle, high, middle high, etc.), “collar” (blue collar vs white collar). Keep in mind, that businesses do not have to stick to one type of segmentation only. Segmentation is like a lens through which you see the market in different colours. The more types of segmentation a firm uses, the more detailed understanding of its potential customers it has and the more targeted its marketing is (more about what that means — later).

The types of segmentation or thinking about which criteria to use to divide the market (demographic, geographic, psychographic) is what step 2 of the brain exercise was about. Deciding how exactly to divide the market within each criterion (for example, if we use psychographic segmentation for selling snowboards then we might divide the customers by active and passive lifestyles) refers to step 3 of the exercise.

Targeting is the process of selecting the relevant market segments to sell to. That is what you did in step 4 of the “dividing the market” brain exercise. Target market refers to potential customers that share similar characteristics.

There were 3 main types of segmentation and there are also 3 main types pf targeting. Actually, there are way more then 3 and some other types of targeting might be a good topic of your BMEE, if you are really interested in targeting and marketing in general. However, we'll discuss the basics only.

Undifferentiated (mass) targeting is basically not targeted at all, it’s pretty much covers all human beings. For example, Coca-Cola, Pepsi, Kleenex could be examples of firms using undifferentiated targeting.

Differentiated (segmented) targeting selects a few segments and targets them differently. For example, Nike, Dior, Toyota might do it. Their products might also be pretty much for everyone but different group of customers have to be approached differently. Let’s say, if Dior wants to sell male perfume and female perfume, it is very much likely to approach these two target markets differently, whereas for Coke (that is non-targeted), gender (or anything else) doesn’t matter that much…

Concentrated (niche) targeting is aimed at a very specific and narrow group of customers/consumers/users. For example, Billabong targets surfers, Burton targets snowboard riders, lewwinski.com targets IB DP Business Management students.

And lastly, there is also consumer profiling (that you did in step 5 of the brain exercise) — the process of outlining the description of a “perfect customer” by listing their key characteristics. It’s very similar to targeting, and is basically a written summary of targeting and segmentation. Consumer profile is a description of a potential customer. This potential customer in a consumer profile can be a person that might not exist in reality, for example he/she might have a range of ages (as opposed to one age), several genders, multiple lifestyles and live in different locations at the same time.

The last concept that we’ll explore in this part of class is positioning. It refers to the process of presenting the brand/product in a specific way in order to create the desired customer perception. Positioning is something that a business can manipulate by alternating its product, price, promotion, and change. But perception is something that firms do not have direct control over. Perception happens in the heads of customers, and businesses can affect it, but are not able to control it directly.

In order to see how customers/consumers/users perceive different brands relative to each other, businesses use a tool that is called either product positioning map or product perception map (slightly different aspects of the same thing), but we’ll simply call it PPM — a visual tool that outlines customers’ perceptions on brands/products. Once again, PPM should be based on customers’/consumers’/users’ perceptions, not on what the business thinks of itself and it should be supported by market research data!

The most common way to draw PPM is to use quality and price as axes. If price and quality are the axes of PPM, then all products may be divided into four categories:

1. Premium products (high price, high quality),
2. Cowboy products (high price, low quality),
3. Economy products (low price, low quality),
4. Bargain products (low price, high quality).

However, it does not have to be this way! As a risk-taker exercise, why don’t you choose an industry you like (sports shoes, game consoles, fashion — anything!) and create a unique PPM, where axes are not quality and price, but other characteristics that are more relevant to the industry of your choice.

For some reason, IB sages did not include PPM into the Toolkit, but it is, however, a very useful and yet simple business tool that is one of the most commonly chosen methods in BMIA. So, make a note of it!

Use the table below to note down the differences between niche and mass markets.

Niche market is a very specifically and narrowly defined group of potential customers. For example, male teenagers 15~16 years of age from middle class families in Switzerland who like adventure video games. So, niche market products are for a specific (very specific!) group of people. Marketing approach to niche markets is targeted (see what that means in the previous part of class). Consumer profiles on niche markets are very specific and “realistic”, meaning that the description of a potential customer is likely to sound like a description of a real person with specific characteristics (age, gender, lifestyle, etc). Some examples of businesses that operate in niche markets are Billabong that targets surfers, Lewwinski.com that targets IB DP BM students, Yves Saint-Laurent that targets people (mostly women) interested in upscale fashion and cosmetics. All these markets are quite specific and it’s quite hard to say that these businesses are “for everyone”.

Mass market is quite the opposite of niche market in many ways. It is very unspecific and broadly defined group of potential customers. As opposed to highly targeted niche markets, mass markets are non-targeted. We may say that mass market products are “for everyone”. Consumer profiles for mass market customers sound very broad and “unrealistic”, meaning that the customers are described using a range of ages, genders, lifestyles, and other characteristics. Some examples of businesses that operate in mass markets are Coca-cola, Kleenex and Pepsi. There products are nearly for everyone and there is no need to target a very specific narrowly defined group in order to sell mass market products.

Lastly, businesses do not have to choose either niche or mass market. They may sell different products: some will target a very specific group of people and some will be “for everyone”. I believe Coke Zero might, in a way, be considered a niche market product because it is for middle-aged people who do not want to have real sugar in their drink. But regular Coke is basically for everyone regardless of any demographic, geographic and psychographic characteristics. We might argue to what extent it is true or not but it is quite illustrative to make a point that one and the same business may operate in niche and mass markets at the same time.

Unique selling point (USP) is a special feature of a product or organisation that helps it to stand out among competitors. This way, different businesses that are in the same industry (i.e. offer the same product) can emphasise different features of this product to help them stand out (differentiate) among competitors. Very often, USP is based on one or several elements of the marketing mix (we’ll learn it later in Unit 4): product, price, promotion, place (distribution), processes, people, physical evidence.

For example, let’s say there are 4 pizza restaurants in town: A, B, C and D. A takes pride in the freshest ingredients, compared to the rest of the restaurants. B offers the cheapest pizza in town. C creates really inspiring and cool ads. D has the most rapid delivery. So, even though all pizza restaurants offer the same product (pizza), they are using different USPs based on different elements of the marketing mix: product, price, promotion, place (distribution).

On the one hand, USP is a very cost-effective method to enhance sales: it does not cost much, it’s basically just a decision about the unique feature. However, it does not guarantee sales and it is quite hard to develop a truly unique selling point in industries with tough competition.

Differentiation is the process of using the USP in such a way that customers perceive the product or organisation as unique and different from those that are offered by competitors. As you can see, USP and differentiation are closely related, but the former is a feature and the latter is a process. Very often, differentiation strategies are based on the elements of the marketing mix (learn more about it late in Unit 4), similar to USP: product, price, promotion, place, processes, people, physical evidence.

Keep in mind that USP and differentiation may be based on several elements of the marketing mix at the same time or not relate to it at all. Any feature or any strategy that can be used to help a product/organisation be special compared to competitors refers to USP and differentiation accordingly.

In the pizza restaurants example above, the four differentiation strategies used are: product differentiation, price differentiation, promotion differentiation, place (distribution) differentiation.

So, now you know how businesses can differentiate themselves and their products from competitors. Just to recap, in order to do that, they can use differentiation strategies based on the elements of the marketing mix (later in Unit 4):

• product differentiation,
• price differentiation,
• promotion differentiation,
• place (distribution) differentiation,
• processes differentiation,
• people differentiation,
• physical evidence differentiation.

Let’s look back at the learning objective for this part of class: “explain the importance of USP and discuss how organisations differentiate themselves and their products from competitors”. We discussed the importance of USP and discussed how (i.e. “using which strategies”) organisations differentiate themselves, the only missing part is to learn how to evaluate/discuss differentiation strategies. There is no secret here, we discuss differentiation strategies in the same way as any other strategy, using the SLAP rule that I first introduced in 1.3: for any strategy, consider its implications on internal and external stakeholders (S), consider its short-term and long-term implications (L), consider its advantages/disadvantages (A), and consider to what extent the given strategy is in line with organisational priorities (P).

For example, let’s discuss how Domino’s pizza differentiates. They offer delivery within 30 minutes or a free pizza, in case they don’t deliver on time. This is clearly an example of place (distribution) differentiation. The example below is not prescriptive and SLAP rule is not in any way an IB requirement. This is just a starting point, a tip, a thinking framework for those of you who struggle with generating ideas for evaluation (AO3) questions in IB BM.

(S) In terms of stakeholders, this differentiation results in customer satisfaction and makes them choose Domino's, when speedy delivery is the most important factor. However, it puts enormous pressure on delivery stuff who get penalised for not delivering on time, so it might result in high staff turnover.

(L) In the short term, this kind of differentiation helps to attract many customers because it is appealing to get a free pizza if it’s not delivered within 30 minutes. However, in the long term, it is important to develop a really efficient distribution system, otherwise business might work at loss, giving out free pizzas…

(A) On the one hand, distribution differentiation seems to work for Domino's, because speedy delivery is one of the first things that comes to mind when customers are asked to describe what is special about Domino's. On the other hand, this USP is a common source of conflict between customers, delivery staff and management when pizza is not delivered on time.

(P) Domino’s mission is “to be the leader in delivering off-premise pizza convenience to consumers around the world”. Based on this mission, we may assume that distribution differentiation is in line with the mission statement.

Make sure you can define all of these:

1. Marketing planning
2. Marketing plan
3. Marketing cycle
4. Market segmentation
5. Market segment
6. Demographic segmentation
7. Geographic segmentation
8. Psychographic segmentation
9. Targeting
10. Target market
11. Undifferentiated (mass) targeting
12. Differentiated (segmented) targeting
13. Concentrated (niche) targeting
14. Consumer profiling
15. Consumer profile
16. Positioning
17. PPM
18. Premium products
19. Cowboy products
20. Economy products
21. Bargain products
22. Niche market
23. Mass market
24. USP
25. Differentiation