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Chapter 2: Strategic Planning in Marketing – Comprehensive Notes

2.1 Developing a Strategic Plan

  • Learning Outcomes (2.1):

    • LO1 Define strategic planning and list the steps in the strategic planning process.
    • LO2 Write an effective vision statement and a mission statement.
    • LO3 Describe the role of company values.
    • LO4 Perform a gap analysis.
    • LO5 Write SMART objectives and goals.
    • LO6 Summarize ways to monitor progress of the strategic plan.

  • Strategic planning is the process of developing and maintaining a strategic fit between the organization’s goals and capabilities, and its changing marketing opportunities.

  • Key levels of strategy in a complex organization:

    • Corporate-level strategy: covers the entire business with multiple businesses/divisions/SBUs.
    • Business-level strategy: plan created for a single business or operating unit.
    • Functional strategy: plan to achieve corporate- and business-level objectives in functional areas (e.g., human resources, marketing, production).

  • The strategic planning process and structure:

    • Step 1: The Vision Statement – What the company aims to create for the future.
    • Step 2: The Mission Statement – Why the business exists; what it does, who it serves, what sets it apart.
    • Step 3: Gap Analysis – Internal audit asking: Where are we now? Where would we like to be? What’s stopping us from getting there?
    • Step 4: Establish Objectives and Goals – The key actions required to implement the strategy.
    • Step 5: Monitor Progress – Continuous monitoring and revising to stay on track to meet goals.

  • Vision and Mission statements (for forging a sound mission, answer):

    • What is our business?
    • Who is the customer?
    • What do consumers value?
    • What should our business be?
    • Successful companies continuously raise these questions and answer them carefully and completely.
    • Mission statement should:
    • Not be myopic in product terms
    • Be meaningful and specific
    • Be motivating
    • Emphasize the company’s strengths
    • Contain specific workable guidelines
    • Not be stated as making sales or profits

  • Setting Company Objectives and Goals:

    • Business objectives examples:
    • Build profitable customer relationships
    • Invest in research
    • Improve profits
    • Marketing objectives examples:
    • Increase market share
    • Create local partnerships
    • Increase promotion
    • The mission is turned into detailed supporting objectives for each level of management; each manager should have objectives and be responsible for reaching them.
    • A broad mission can tie a diverse product portfolio together under a single mission, leading to a hierarchy of objectives (business objectives and marketing objectives such as building profitable customer relationships by developing superior products).

  • SMART Goals (Definition and criteria):

    • Specific: Specific – clear and easy to understand.
    • Measurable: Measurable – quantifiable and easy to track.
    • Attainable: Attainable – should be reachable with some stretch.
    • Realistic: Realistic – substantial yet obtainable.
    • Time-bound: Time ext{-}bound – a target or end date, creating urgency.
    • Figure reference: "SMART Goals" illustration (Figure 2.4).

  • Practice: Discussion Question (2.1): Create two SMART goals using your personal situation (work, home, or school); specify what you can plan now to meet the goal.

  • Practical connections:

    • This section links foundational planning concepts to real-world strategy formation: aligning mission, vision, objectives, and metrics to guide resource allocation and action plans across corporate, business, and functional levels.

2.2 The Role of Marketing in the Strategic Planning Process

  • Learning Outcomes (2.2):

    • LO1 Explain the role of marketing in the strategic planning process.
    • LO2 Discuss the business portfolio and identify planning tools.
    • LO3 Describe a SWOT analysis.
    • LO4 List and describe marketing strategies based on analytics.

  • Role of marketing and critical functions:

    • The marketing philosophy should be represented throughout the strategic planning process.
    • Marketers help the strategic planning team by gathering and analyzing information (the first step in a gap analysis).
    • Marketers identify and assess trends and their impact on the marketing environment.

  • Designing the business portfolio:

    • Portfolio analysis is a major activity in strategic planning that evaluates the products and businesses that make up the company.
    • The business portfolio is the collection of businesses and products that make up the company.
    • Strategic business units (SBUs) can be:
    • a company division
    • a product line within a division
    • a single product or brand

  • Analyzing the current business portfolio:

    • Identify SBUs, assess attractiveness, and decide how much support each SBU deserves.
    • Common problems with matrix approaches:
    • Difficulty in defining SBUs and measuring market share and growth
    • Time-consuming and expensive
    • Focus on current businesses, not future planning

  • Tools and examples:

    • The Microsoft revenue portfolio example (Figure 2.5) shows how a company’s revenue comes from multiple product lines/services.
    • Tools to aid portfolio analysis include the BCG matrix and SWOT analysis.

  • Boston Consulting Group (BCG) Matrix (How to read):

    • Stars: high market share and high market growth rate
    • Question marks: low market share, high market growth rate
    • Cash cows: high market share, low market growth rate
    • Poor dogs: low market share, low market growth rate
    • Figure reference: Figure 2.6 BCG Matrix

  • SWOT Analysis (keys to successful use):

    • Unbiased input
    • Prioritize listings
    • Develop an action plan
    • Follow up, review, and modify where necessary
    • Common template (Figure 2.8)

  • Market share growth strategies (growth opportunities):

    • Marketing needs to identify, evaluate, and select opportunities using the product/market expansion grid:
    • Market penetration: sell more to current customers with existing products (e.g., more stores, more advertising/promotions) to increase revenue and market share in existing markets.
    • Product development: offer modified or new products to current markets (new or improved products) to drive revenue, profits, and market share.
    • Market development: identify and develop new markets for current products (new demographics or new geographic markets such as in Asia).
    • Diversification: start up or buy businesses beyond current products/markets.
    • Example: Starbucks expanding in China (growth via market development and product expansion) and entering ultra-premium markets (diversification).

  • Product/Market Expansion Grid (diagram content):

    • Existing products vs. New products on the vertical axis; Existing markets vs. New markets on the horizontal axis.
    • Growth strategies correspond to the four quadrants: Market Penetration, Product Development, Market Development, Diversification.
    • Example: Starbucks in China and Starbucks Reserve Roasteries as diversification into ultra-premium experiences.
    • Copyright/credit note: Figure content from Pearson/OpenStax materials.

  • Product diversification strategies (types):

    • Concentric diversification: add similar products/services to existing business.
    • Horizontal diversification: add new and/or unrelated products/services to expand the customer base.
    • Conglomerate diversification: develop new products/services that are significantly unrelated to current products.
    • Figure 2.9 types of diversification strategies.

  • Designing the business portfolio: growth and downsizing

    • Companies should plan for growth and also plan for downsizing when needed.
    • Downsizing strategies include pruning, harvesting, or divesting unprofitable or strategic-misaligned brands/products.
    • Reasons to abandon products/markets include over-expansion, lack of experience in new areas, changing market environments, or aging product lines.
    • Example reference: Starbucks’ multipronged growth strategy; also note ongoing portfolio management practices.

  • Planning marketing: partnering to build customer relationships

    • Marketing cannot create superior customer value alone; cross-department collaboration is essential.
    • Internal value chain: marketing works with other departments to carry out value-creating activities from design to delivery and support.
    • Value chain vs. value delivery network:
    • Value chain: the company’s internal departments.
    • Value delivery network: the company, suppliers, distributors, and customers who partner to improve overall performance.

  • Marketing strategy and the marketing mix (overview):

    • Strategy asks two questions: which customers to serve (segmentation/targeting) and how to create value (differentiation/positioning).
    • The marketing program uses the four Ps to deliver value: Product, Price, Place, Promotion.
    • Core idea: marketing is about creating customer value and profitable relationships.

2.3 Purpose and Structure of a Marketing Plan

  • Learning Outcomes (2.3):

    • LO1 Explain the purpose of a marketing plan.
    • LO2 List and discuss elements that should be included in a marketing plan.

  • Marketing plan purpose:

    • Creates structure to carry out strategic plans.
    • Supports requests for outside funding.
    • Creates action plans.
    • Incorporates necessary components to monitor goals and objectives.
    • Keeps the team on a consistent path.
    • Includes budgeting along with the action plan.

  • Marketing Plan Structure (Figure 2.11):

    • Executive summary: brief overview focusing on clarity; informs outsiders of broad details.
    • Introduction, description of company and team, market factors and trends, product/services being marketed, customer base and related activities, financial overview, summary of objectives/strategies.
    • Mission statement: action statement declaring the purpose and how it serves customers.
    • SWOT Analysis: internal/external influences in current position.
    • Objectives and issues: SMART goals/objectives; may include revenue, market share, foot traffic, awareness, etc.
    • Market segmentation and target market: the "who" and the "how" of reaching customers.
    • Buyer persona: a profile of the ideal customer; what they look like.
    • Positioning: how to reach each targeted segment after segmentation.
    • Current marketing situation: total market description; product review; competitor analysis.
    • Marketing strategy: product strategy (benefits, voids, solutions), pricing strategy (key to positioning and revenue), promotion strategy (awareness and demand), distribution strategy (access to customers).
    • Marketing implementation: turning strategies into actions (who, where, when, how).
    • Marketing controls/metrics: tools to monitor progress and make adjustments.
    • Measuring and managing ROI: ROI definition and calculation; see Figure 2.8 for marketing ROI illustration.
    • Action programs: specific actions, costs, and timing for plan implementation.
    • Budget concerns: projected P&L with forecasted units sold, average net price, cost of production, distribution, and marketing expenditures.
    • Controls: metrics to monitor progress (pace of sales, revenue, expenses).

  • Marketing ROI (concept):

    • Net return from marketing investment divided by the costs of the marketing investment.
    • Formula reference: ROI = rac{Net\ return}{\text{Cost of marketing investment}}

  • Practical connections:

    • A marketing plan translates the strategic plan into a concrete, budgeted blueprint with clear roles, timelines, and metrics.
    • This section emphasizes accountability, transparency, and alignment with overall corporate strategy.

2.4 Marketing Plan Progress Using Metrics

  • Learning Outcomes (2.4):

    • LO1 Define marketing metrics.
    • LO2 Explain key performance indicators (KPIs).
    • LO3 Provide examples of business objective KPIs.
    • LO4 Characterize sales/revenue generation KPIs.
    • LO5 Provide examples of market share KPIs.
    • LO6 Classify and discuss customer support KPIs.

  • Key performance indicators (KPIs):

    • KPIs help identify and focus on data that counts.
    • Metrics measure what is happening at a point in time but do not explain why.
    • KPIs are tied to business objectives and have targets and timeframes; they create a scorecard to gauge performance against goals.
    • Definition reference: Figure content on KPIs.

  • Business-Level KPIs (examples):

    • Total sales/revenue growth: Growth\ rate = \frac{Rt - R{t-1}}{R_{t-1}} \times 100\%
    • New/incremental sales revenue: growth from new sales vs. repeat sales.
    • Profitability: efficiency in converting sales into gross profit, using gross margin as a percentage of sales.
    • Figure reference: Business-Level KPIs (Figure 2.12).

  • Sales/Revenue Generation KPIs:

    • Average revenue per customer: \text{Average revenue per customer} = \frac{\text{Total revenue}}{\text{Number of customers}}
    • New customer acquisition cost: \text{Cost per new customer} = \frac{\text{Total cost of sales and marketing}}{\text{Number of new customers}}
    • Customer retention rates: percentage of customers who have purchased previously.
    • Figures reference: (Figure 2.13).

  • Market Share KPIs:

    • Market share in a category: company category sales / total category sales; provides a performance signal but not the full story.
    • Relative market share: Relative\ Mkt\ Share = \frac{Market\ share{company}}{Market\ share{competitor}} with example: if company 5% and competitor 13%, relative share ≈ 0.38 (38%).
    • Figure reference: (Figure 2.13 or 2.12/2.13 depending on layout).

  • Customer Support KPIs:

    • Customer satisfaction score: derived from surveys; high scores are key to success.
    • Customer resolution rate: percentage of issues resolved; contributes to customer satisfaction.
    • Customer resolution time: time taken to resolve issues; linked to resolution rate.
    • Figure reference: (Figure 2.14).

  • Discussion Question (2.4):

    • Which KPI is most useful? Why? How would you use this calculation? What would the company’s response options be if the KPI indicates under- or over-performance?

2.5 Ethical Issues in Developing a Marketing Strategy

  • Learning Outcomes (2.5):

    • LO1 Explain the importance of ethical marketing.
    • LO2 Describe key ethical considerations in strategic planning.
    • LO3 Discuss examples of ethical companies.

  • Marketing ethics and impact on business:

    • Ethical marketing supports customer loyalty, credibility, and brand enhancement.
    • Corporate social responsibility (CSR) is growing to meet expectations of younger generations and others.
    • Transparency is increasingly important.
    • CSR involves commitments to employee rights, inclusion, environment, sustainability, and other social causes.

  • Key ethical considerations in strategic planning:

    • Choices between doing what sells vs. doing what is best for stakeholders.
    • Balancing public safety versus profits.
    • Weighing standard procedures vs. right actions for environment, employees, and consumers.
    • Questions to consider in planning:
    • Are all stakeholders being incorporated into the planning?
    • Does the business plan support the triple bottom line (economic, social, environmental)?
    • Do organizational and individual values align?
    • Should the mission and vision be adjusted to reflect current direction?

  • Discussion Question (2.5):

    • Does your support for companies/products depend on their practices? Where do you draw the line? How do needs, wants, and situational factors influence this?

Key concepts and cross-cutting connections

  • Strategy levels (corporate, business, functional) align with resource allocation and planning across the organization.
  • The mission and vision anchor the strategic plan and filter decisions through a values-based lens.
  • Gap analysis serves as the diagnostic tool to identify where the company stands versus where it wants to be, shaping objective setting.
  • The portfolio approach (SBUs, BC market/segment analysis, BCG matrix, SWOT) informs where to invest, harvest, or divest.
  • The product/market expansion grid provides a practical map for growth and the rationale behind expanding into new markets or products.
  • The marketing mix (four Ps) is framed as the four Cs in customer-centric terms: Product → Customer solution; Price → Customer cost; Place → Convenience; Promotion → Communication.
  • The marketing plan translates strategy into concrete actions, budgets, and controls, enabling ongoing measurement through KPIs and ROI analysis.
  • Ethics and CSR connect strategic choices to long-term value creation, stakeholder trust, and sustainability, which in turn influence brand equity and loyalty.

Quick reference formulas (LaTeX)

  • Growth rate (sales/revenue):
    Growth\ rate = \frac{Rt - R{t-1}}{R_{t-1}} \times 100\%
  • Relative market share:
    Relative\ Market\ Share = \frac{Market\ share{company}}{Market\ share{competitor}}
  • Return on Marketing Investment (ROI):
    ROI = \frac{Net\ return}{\text{Marketing\ investment\ costs}}
  • Average revenue per customer:
    \text{Average revenue per customer} = \frac{\text{Total\ revenue}}{\text{Number\ of\ customers}}
  • Cost per new customer (acquisition):
    \text{Cost per new customer} = \frac{\text{Total\ cost\ of\ sales\ and\ marketing}}{\text{Number\ of\ new\ customers}}

Notes:

  • All equations are presented in LaTeX format as shown above and enclosed in double-dollar markers where applicable.
  • The content mirrors the OpenStax Principles of Marketing Chapter 2 slides, including figures and examples (e.g., BCG matrix, Microsoft and Starbucks portfolio references, and Lime positioning example).
  • For study purposes, treat each section as a modular topic you can reference during revision sessions; the sections connect to form a cohesive framework for strategic planning in marketing.