Why Marketing Planning? (1 of 2)
Plans are of little importance, but planning is essential (W. Churchill)
Despite the ravings of some so-called authors (I won’t mention their names, but you will, unfortunately, find them on the web) who attempt to be original and iconoclastic, saying that “strategic planning is dead”, due to a number of obvious (but irrelevant) considerations such as the speed of change, the idea of planning in general, and marketing planning in particular, is still well-alive, although misconceived and evidently controversial.
It obviously depends on what we mean by planning, and how flexibly we implement it: the problem is totally different from that of challenging the usefulness of planning, i.e. that very few companies, especially among SMEs, have some sort of plan.
Before listing exactly 30 good reasons (!) why planning is useful in coming posts, I would just try to refer to the meaning of strategy and the importance of adopting a strategic and systematic marketing approach.
What is strategy?
Among the various definitions found in the literature, I think that, from a practical and managerial perspective, the following combination of concepts best conveys the nature and purpose of strategy:
- set of decisions
- related to the allocation of resources
- over the medium-long term
- to one or more product/market combinations
- in view of specific objectives
- considering external opportunities and threats
- and internal capabilities and constraints;
- definition of the related action plans.
This definition is applicable to any business context, including non-profit organizations, that could not survive and prosper without funding, provided directly by the market and/or by donors that believe in their raison d’être.
Needless to say, without an action plan, or at least some “action”, all the rest is total bullshit!
The source of any organization’s wealth
Everybody understands that the only true source of wealth for any organization is the market, which purchases its products or services or benefits from them in case of “non-profits”: without sales and/or other sources of funding (justified by the market’s needs), the organization would not generate any value, and all the other potential providers of funds and resources (shareholders, banks, suppliers, donors) would, sooner or later (probably, sooner!) stop feeding it.
At the heart of any business strategy we therefore need to have a sound marketing strategy: all the other company’s functional areas (R&D, manufacturing, HR, finance, logistics) are just “ancillary” to the marketing function, and would not survive without the organization’s ability to valuably satisfy the market (see a famous article of twenty years ago from Regis McKenna: https://hbr.org/1991/01/marketing-is-everything).
If we agree on the following interrelated objectives, i.e. generating value through market satisfaction, we would also agree on the need for estimating, measuring and controlling their achievement, and understanding their relationships, in order to make strategic decisions that could positively influence their behavior over time: this is just planning!
The elementary indicators we are suggesting for measuring these two factors, which are the prerequisite for the generation of cash (cash is king!, as somebody appropriately said), are, respectively, the following:
- contribution margins, which represent the most appropriate variable for assessing the actual contribution (revenues or any other source of funds less variable and direct fixed costs) of a given and specific business to the overall organization’s wealth, particularly if it operates in more than one business, which is the most frequent case
- market share, which represents the portion of the market’s purchases or uses satisfied by a given organization, with reference to a specific and well-defined industry sector or segment, within a given time horizon:
- this indicator is critical also for small and medium enterprises (SMEs), provided that the market in which they operate is correctly identified and delimited (the so-called “pertinent” or reachable market)
- it would be senseless to measure the market position, i.e. the organization’s relative ability to satisfy the market, in relation to an entity (defined, for example, in geographical terms) that the company is not “physically” able to reach (off or online)
- this doesn’t mean that we need to be “precise” in estimating our relative presence in the market, but we should at least attempt to be aware of the trend of this presence, especially in relation to its major components (coverage of the reachable market and penetration of its average needs).
Saying that “market share is not anymore fashionable”, as some other ineffable authors do in the attempt to be perceived as “original” (Simon et al. 2006), is therefore either trivial (if they mean that market share should not be pursued at the expense of profitability and/or positive cash-flows) or a nonsense (if they mean that market share is unimportant): without a market position (precisely, “some” market share) it would be impossible to generate any wealth! (continued in a coming post)