Chapter 2: Strategic Planning in Marketing | Principles of Marketing

PRINCIPLES OF MARKETING
Chapter 2 Class Notes
Strategic Planning in Marketing

OpenStax — Principles of Marketing (2023)

Section 2.1 — Developing a Strategic Plan

What is Strategic Planning?

Strategic planning is the process of developing and maintaining a strategic fit between the
organization's goals/capabilities and its changing marketing opportunities. It is the overall 'game plan'
for how the business will compete in its chosen markets.

Levels of Strategy
• Corporate-Level Strategy: Covers the entire business in complex organizations with multiple
divisions/SBUs; formulated by upper management.
• Business-Level Strategy: Strategic plan for a single business unit; developed by middle
management to support corporate strategy.
• Functional Strategy: Plan to achieve corporate/business-level objectives in functional areas
(HR, marketing, production).
Example: Procter & Gamble uses five industry-based SBUs (baby/family care, beauty, health care,
grooming, fabric/home care) each with its own CEO operating as a standalone business.

The 5 Steps of Strategic Planning

• Step 1 — Vision Statement: Forward-looking statement of where the company wants to go
long-term. Should be inspirational and aspirational. Example: Amazon's vision is to be 'earth's
most customer-centric company.'
• Step 2 — Mission Statement: Answers 'Why does the company exist?' — summarizes what it
does, who it serves, and what differentiates it. Acts as guideposts for achieving the vision.
• Step 3 — Gap Analysis: Internal analysis to identify deficiencies that hinder goal achievement.
Answers: Where are we? Where do we want to be? What's stopping us?
• Step 4 — Goals and Objectives: Goals are broad desired outcomes (3–5 years); Objectives
are specific, measurable action items to achieve goals (within 1 year).
• Step 5 — Monitor Progress: Track the strategic plan's execution using KPIs, dashboards, and
regular reviews.
Vision vs. Mission Statements
◦ Vision: Future-focused — where is the company going? (inspirational, aspirational)

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◦ Mission: Present-focused — why does the company exist? (purpose, values, customers served)
◦ Customer-Oriented Mission: Focuses on solutions to customer needs (e.g., IKEA: affordable
well-designed furniture)
◦ Product-Oriented Mission: Focuses on the offering itself (e.g., eBay: world's favorite destination
for unique items)
Gap Analysis — 4 Steps
◦ Step 1: Identify the current state (e.g., 5% annual growth)
◦ Step 2: Identify the desired state (e.g., 25% growth in 3 years)
◦ Step 3: Identify the gaps (e.g., weak advertising, new competitors, pricing issues)
◦ Step 4: Devise improvements to close the gaps (new campaigns, cost cuts, pricing adjustments)
SMART Objectives
Objectives should be SMART:
◦ Specific: Clearly defined target
◦ Measurable: Quantifiable, can track progress
◦ Attainable: Realistic given current resources
◦ Realistic/Relevant: Aligned with broader goals
◦ Time-Bound: Has a deadline
Example of a SMART objective: 'Increase website conversion rate from 2% to 4% by December 31st of
this fiscal year.'

Section 2.2 — The Role of Marketing in the Strategic Planning Process

Business Portfolio Analysis

A business portfolio is the collection of all products and/or services offered by a company. Portfolio
analysis evaluates which offerings to invest in, maintain, or discontinue.

BCG Matrix (Boston Consulting Group Matrix)

The BCG Matrix categorizes SBUs/products by market share (horizontal axis) and market growth rate
(vertical axis):
• Stars (High Growth, High Share): Market leaders in fast-growing markets. Require heavy
investment to maintain position. May eventually become cash cows.
• Cash Cows (Low Growth, High Share): Dominant products in slow-growth markets. Generate
more cash than they consume. Use profits to fund other SBUs.
• Question Marks/Problem Children (High Growth, Low Share): Small share in a rapidly
growing market. Require heavy investment to gain share or be divested.
• Dogs (Low Growth, Low Share): Weak products in slow-growth markets. May be divested or
discontinued.

SWOT Analysis
SWOT analysis examines internal strengths and weaknesses along with external opportunities and
threats to inform strategy:
• Strengths (Internal): Competitive advantages, unique resources, strong brand, loyal customer
base.

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• Weaknesses (Internal): Areas where the company underperforms — limited resources, poor
location, weak supply chain.
• Opportunities (External): Favorable conditions in the environment — market gaps, emerging
technology, competitor weakness.
• Threats (External): Unfavorable external forces — new competitors, regulation changes,
economic downturns, supply chain disruptions.
SWOT Strategies: S+O = Maxi-Maxi (leverage strengths to exploit opportunities); W+O = Mini-Maxi
(overcome weaknesses to pursue opportunities); S+T = Maxi-Mini (use strengths to minimize threats);
W+T = Mini-Mini (defensive strategy).

Ansoff's Growth Matrix (Market-Product Strategies)

The Ansoff Matrix outlines four strategies for business growth:
• Market Penetration: Sell more of the existing product to the existing market. Least risk.
Example: promotional discounts to existing customers.
• Market Development: Sell existing products in new markets. Example: expanding to
international markets.
• Product Development: Develop new products for existing markets. Example: adding a new
product line for current customers.
• Diversification: Enter new markets with new products. Highest risk. Three types: concentric
(related), horizontal (unrelated to existing customers), conglomerate (completely unrelated).

Porter's Generic Competitive Strategies

• Cost Leadership: Become the lowest-cost producer in the industry to undercut competitors on
price.
• Differentiation: Offer unique products/features that customers value and will pay a premium
for.
• Focus/Niche Strategy: Target a narrow market segment with either cost leadership or
differentiation.

Section 2.3 — Purpose and Structure of the Marketing Plan

What is a Marketing Plan?

A marketing plan is a formal, written document that describes a company's overall marketing effort. It
translates the strategic plan into specific marketing actions and assigns responsibilities.

Why Marketing Plans Matter

• Forces systematic thinking about marketing activities.
• Allocates resources effectively across marketing functions.
• Holds the marketing team accountable for results.
• Aligns internal teams around common goals.
• Provides a baseline for measuring marketing effectiveness.

12 Key Elements of a Marketing Plan

• 1. Executive Summary: Brief overview of the plan's main goals and recommendations.

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• 2. Company Overview: Background on the company, its history, structure, and current
situation.
• 3. Mission Statement: Company's purpose and reason for existing.
• 4. Marketing Goals and Objectives: Specific measurable targets aligned with company
strategy (SMART).
• 5. SWOT Analysis: Internal/external analysis of Strengths, Weaknesses, Opportunities,
Threats.
• 6. Target Market Analysis: Identification and profiling of the specific customer segment(s)
being targeted.
• 7. Competitive Analysis: Assessment of competitors' strengths, weaknesses, and strategies.
• 8. Marketing Strategy: The overall approach — product positioning, differentiation, and value
proposition.
• 9. Marketing Mix (4Ps): Specific plans for Product, Price, Place, and Promotion.
• 10. Marketing Budget: Allocation of financial resources to marketing activities.
• 11. Implementation Timeline: Specific milestones, action items, and deadlines.
• 12. Evaluation and Controls: Metrics and processes to monitor plan performance and make
adjustments.

Target Market Analysis

Before identifying target markets, marketers use market segmentation — dividing a broad consumer
market into sub-groups of consumers with common needs or characteristics. Key segmentation
variables include:
• Geographic: Region, climate, urban/rural, city size.
• Demographic: Age, gender, income, education, family size, occupation.
• Psychographic: Lifestyle, personality, values, interests.
• Behavioral: Buying occasion, usage rate, brand loyalty, benefits sought.

Section 2.4 — Marketing Plan Progress Using Metrics

What are Marketing Metrics?

Marketing metrics are measurable values that track the effectiveness of marketing campaigns and
overall business performance. They help answer the question: 'Is our marketing working?'

Key Performance Indicators (KPIs)

KPIs are specific metrics tied to business goals. Categories include:
Business-Level KPIs
◦ Revenue growth rate
◦ Market share
◦ Return on Investment (ROI)
◦ Net Profit Margin
◦ Customer Lifetime Value (CLV)
Sales/Revenue KPIs
◦ Sales revenue: Total revenue generated from sales

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◦ Cost per lead (CPL): Cost to generate a potential customer

◦ Conversion rate: Percentage of leads that become paying customers
◦ Average purchase value
◦ Monthly recurring revenue (MRR) — especially for subscription businesses
Customer Support KPIs
◦ Net Promoter Score (NPS): Likelihood of customers to recommend the company (scale 0–10)
◦ Customer Satisfaction Score (CSAT): How satisfied customers are after interactions
◦ Customer Retention Rate: Percentage of customers retained over a period
◦ Customer Churn Rate: Percentage of customers lost over a period
◦ Customer Acquisition Cost (CAC): Total cost to acquire one new customer

Dashboards and Marketing Analytics

Modern marketers use dashboards — real-time digital displays of key metrics — to monitor marketing
performance. Marketing analytics platforms like Google Analytics, HubSpot, and Salesforce allow for
data-driven decision-making.

Section 2.5 — Ethical Issues in Developing a Marketing Strategy

Overview of Ethics in Strategic Marketing

Strategic marketing decisions carry ethical implications. Marketers must consider not just profitability
but also fairness, transparency, and societal impact when developing plans.

Common Ethical Challenges in Marketing Strategy

• Targeting Vulnerable Populations: Directing marketing at children, elderly, or low-income
groups in ways that exploit their vulnerabilities.
• Deceptive Positioning: Misrepresenting the features, benefits, or uniqueness of a
product/service relative to competitors.
• Misleading Pricing: Using 'fake' original prices or deceptive 'sale' pricing to manipulate
consumer perceptions of value.
• Data Privacy: Collecting, storing, and using consumer data without proper disclosure or
consent in digital campaigns.
• Greenwashing: Claiming environmental responsibility without meaningful sustainable practices
to back up the claims.
• Planned Obsolescence: Intentionally designing products to become outdated, forcing
consumers to upgrade more frequently.

Ethics in Competitive Strategy

• Predatory Pricing: Pricing products below cost to drive competitors out of the market is
unethical and may be illegal.
• False Comparative Advertising: Making misleading comparisons with competitor
products.
• Intellectual Property Violations: Copying competitor products or designs without
permission.

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Building an Ethical Marketing Culture

• Establish a clear code of ethics and communicate it throughout the organization.
• Provide ethics training to marketing teams.
• Create whistleblower protection policies.
• Tie performance reviews to ethical behavior, not just results.
• Align marketing strategy with the company's stated CSR commitments.

Key Terms Summary

• Strategic Planning: Process of developing and maintaining strategic fit between the
organization's goals/capabilities and its changing marketing opportunities.
• Vision Statement: Forward-looking statement of where the organization wants to be in the
long-term; inspirational and aspirational.
• Mission Statement: Statement of the company's purpose — what it does, who it serves, and
what differentiates it.
• Gap Analysis: Internal review to identify deficiencies between the current state and desired
state of the organization.
• SMART Objectives: Objectives that are Specific, Measurable, Attainable, Realistic/Relevant,
and Time-Bound.
• BCG Matrix: Tool that categorizes business units by market share and market growth rate into
Stars, Cash Cows, Question Marks, and Dogs.
• SWOT Analysis: Framework analyzing internal Strengths and Weaknesses plus external
Opportunities and Threats.
• Ansoff's Growth Matrix: Strategy framework with four growth strategies: market penetration,
market development, product development, and diversification.
• Marketing Plan: Formal written document describing a company's overall marketing effort with
goals, strategy, budget, and controls.
• KPIs (Key Performance Indicators): Specific measurable values that track the effectiveness of
marketing campaigns and business performance.
• Market Segmentation: Dividing a broad consumer market into sub-groups with common needs
or characteristics.
• SBU (Strategic Business Unit): A distinct business, product line, or division within a larger
company that operates with its own strategy.

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