Reading: Lesson 6 - Marketing Plan

10.6.A - Marketing Plan

1. DEVELOPING A MARKETING PLAN

1. All the marketing decisions for a particular product must work together for the product to succeed. For example, advertising may be timed to coincide with a new product’s introduction. To help coordinate marketing activities, businesses develop marketing plans. The marketing plan is a detailed written description of all marketing activities that a business must accomplish in order to sell its products. It describes the goals the business wants to accomplish, the target markets it wants to serve, the marketing mixes it will use for each product, and the tactics that make up the marketing strategy. It identifies the ways in which the business will evaluate its marketing to determine if the activities were successful and the goals were accomplished. The marketing plan is written for a specific time period, such as one year. The marketing managers develop the marketing plan, based on information from many other staff members. Market research is very important in developing a marketing plan. Once a written plan is completed, all of the people involved in marketing activities can use it to guide their decisions about each marketing mix element and to coordinate their efforts as they complete the planned activities.
   
2. Marketing managers cannot afford to guess about which types of marketing mixes to use. Marketing is too expensive and customers have too many choices for businesses to risk making mistakes. Marketers use concepts such as the product life cycle and consumer goods categories to plan effective marketing mixes. For example, if the sales of a product are growing, the mix will be quite different than if the sales are relatively constant. If consumers view a product as a specialty good, marketers will emphasize different mix elements than if it is a convenience good. Marketers study markets and competition and use their knowledge of marketing to make decisions that will satisfy customer needs and result in a profit for the company.

2. THE PRODUCT LIFE CYCLE

1. Products move through fairly predictable stages throughout their product lives. They are introduced, and then their sales and profits increase rapidly to a point at which they level off. Eventually, both profits and sales decline as newer products replace the old ones. The product life cycle consists of the four stages (sometimes called phases) of sales and profit performance through which all brands of a product progress: introduction, growth, maturity, and decline. The product life cycle usually describes an industry’s progression. The Figure below is a graphical depiction of sales and profits at different stages of the product life cycle. 
   

   
   

2. In the introduction stage, a new product enters the market. Initially, there is only one brand of the product available for consumers to purchase. The new product is quite different from, and expected to be better than, products customers are currently using. Examples of products that were recently in the introduction stage include cellular telephones with videoconferencing capability, 4-D televisions, and small portable tablet computers. When a company introduces a product, it is concerned about successfully producing and distributing it. The company needs to inform prospective customers about the new product and its uses, because people will be unfamiliar with it. There is no competition from an identical type of product, but customers are probably using other, older products. The company must show customers how the new product is better than the products they are currently using. Initially, only a few customers will buy the product, but their experience will often determine whether other people will want to purchase the product as well. The costs of producing and marketing a new product are usually very high, resulting in a loss or very low profits for the firm initially. The company is counting on future sales to make a profit. If a product is successfully introduced, an increasing number of consumers will accept it, sales will rise rapidly, and profits should grow.
   

3. When competitors see the success of the new product, they will want to get into that market as well. When several brands of the new product are available, the Product Life Cycle $ 0 Sales Profits market moves into the growth stage of the life cycle. If customers like the new product, they will begin buying it regularly and telling others about it, so more and more customers become regular purchasers. In the growth stage, each company tries to attract customers to its own brand. Companies attempt to improve their brands by adding features that they hope will satisfy customers. They also increase their distribution to make the product more readily available to the growing market. Companies ordinarily make a profit in this stage. Profits are likely to increase as companies sell enough of the product to cover the research and development costs.
   

4. A product in the maturity stage has been purchased by large numbers of customers and has become quite profitable. In the maturity stage, the product is competing with many other brands with very similar features. There may be difficulty identifying differences among the brands, but customers may have developed a loyalty to one brand, or a very few brands. In this stage, companies emphasize the promotion of their brand name, packaging, a specific image, and often the price of the product. Because there are so many customers, each business has to distribute the product widely, adding to their costs. Competition becomes intense. Companies spend a lot on promotion and reduce prices, because customers have many brands from which to choose. Profits usually fall even though sales may still rise. Products in the maturity stage include automobiles, laptop computers, personal-care products such as toothpaste and deodorant, and many other products used regularly and purchased without a great deal of thought. One way that businesses respond to the maturity stage of the life cycle is to look for new markets. Businesses often move into international markets as competition increases in their home countries. As several fast-food chains found fewer attractive locations for new stores in the United States, they began to open outlets in Canada, Europe, and Mexico. Now they are expanding into South America and Asia.
   

5. Many products stay in the maturity stage of the life cycle for a long time. However, sooner or later products move into a decline stage. The decline stage occurs when a new product is introduced that is much better or easier to use and customers begin to switch from the old product to the new product. As more customers are attracted to the new product, the companies selling the old product see declines in profits and sales. The companies may not be able to improve the older products enough to compete with the new products, so they drop them from the market when declining profits no longer support their existence. Some companies have been able to move old products out of the decline stage by finding new uses for them. For example, petroleum vapor rubs are being used to treat some fungal infections, and baking soda is used in toothpaste and to remove odors from refrigerators and cat litter boxes. If companies cannot save a product from the decline stage, they attempt to sell their remaining inventory to the customers who still prefer it. However, they spend as little money as possible on marketing the product and do not produce any more.
   

3. PRODUCT CATEGORIES

1. When making marketing decisions, marketing managers need to understand how customers shop for and use products. Products can be classified as either industrial goods or consumer goods. Industrial goods are products designed for use by other businesses. Frequently, industrial goods are purchased in large quantities, are made to special order for a specific customer, or are sold to a selected group of buyers within a limited geographic area. Examples of industrial goods include bricks purchased by a building contractor, aluminum purchased by an aircraft manufacturer, and various forms of technology purchased by accounting firms. Many, but not all, industrial goods are used to produce other products or are incorporated into the products and services offered. Some are used in the operation of the business. Consumer goods are products designed for personal or home use. Jewelry, furniture, magazines, soft drinks, and computer games are some of the many products used by consumers. Consumer goods require careful marketing attention, because there are so many products and brands available for the many potential customer markets throughout the world. Depending on who is making the purchase and how they will use it, a product may be both a consumer good and an industrial good. Gasoline and tablet computers, for instance, may be purchased by consumers in small quantities or by businesses in large quantities.
   
2. Marketers group consumer goods into four categories based on attributes. These four categories are convenience goods, shopping goods, specialty goods, and unsought goods. The categories are based on (1) how important the product is to the customer and (2) whether the customer is willing to spend time to compare products and brands before making a decision to buy. Companies make different marketing decisions, depending on which category of consumer goods they are selling.
   
3. Convenience goods are inexpensive items that consumers purchase regularly without a great deal of thought. Consumers are not willing to shop around for these products because they purchase them often, the many competing products do not differ much from each other, and they don’t cost much money. Therefore, marketers must sell their convenience goods through many retail outlets that are conveniently located near where people work and live. Products that are usually treated as convenience goods include candy, milk, soft drinks, toothpaste, soap, and many other inexpensive household items.
   
4. Products that consumers purchase less frequently than convenience goods, usually have a higher price, and require some buying thought are called shopping goods. Customers see important differences between brands in terms of price and features. Therefore, they are willing to shop at several businesses and compare products and brands before making a purchase. Shopping goods do not have to be sold in as many places as convenience goods. They need effective promotion so customers can make informed decisions. Cars, furniture, large appliances, and houses are all examples of shopping goods.
   
5. Specialty goods are products that customers insist on having and are willing to search for until they find them. Customers who decide that only one product or brand will satisfy them will shop until they locate and buy that brand. Marketers place their specialty goods in fewer businesses within a shopping area, price them higher than competing products and brands, and spend comparatively less on promotion as compared to other types of consumer products. Examples of specialty goods are designer clothing, expensive jewelry, and certain brands of cameras, gaming computers, and automobiles.
   
6. Consumers rarely voluntarily shop for unsought goods, those goods for which there is little expected need in the near future. These types of products present a difficult marketing challenge. Life insurance, cemetery plots, and funeral services are unsought by most consumers. A company marketing unsought goods usually has to go to the customer and use personal selling to discuss the need for the product. Unless the customer recognizes a need that the product can satisfy, the product will remain unsold.