Strategic Marketing Planning: Theory and Practice

The Marketing Review, 2006, 6, 375-418
ISSN1469-347X print / ISSN 1472-1384 online ©Westburn Publishers Ltd.
Strategic Marketing Planning: Theory and Practice1
Malcolm McDonald 2
, Cranfield University School of Management
In order to explore the complexities of developing a strategic marketing plan, this
article is written in three parts.
The first describes the strategic marketing planning process itself and the key steps
within it. It also deals with implementation issues and barriers to marketing planning.
The second part provides guidelines for the marketer which will ensure that the
input to the marketing plan is customer focused and considers the strategic dimension
of all of the relationships the organization has with its business environment.
The third part provides a brief overview of a process for assessing whether the
strategic marketing plan creates or destroys shareholder value, having taken account of
the risks associated with the plan, the time value of money and the cost of capital. It
also outlines other metrics for measuring the effectiveness of the marketing strategy.
Keywords: strategic marketing, planning, world class, success factor, marketing
accountability
Introduction
Research into the efficacy of formalised marketing planning (Thompson
1962; Leighton 1966; Kollatt et al. 1972; Ansoff 1977; McDonald 1984;
Greenley 1984; Piercy 1997; Smith 2003) has shown that marketing
planning can make a significant contribution to commercial success. The
main effects within organizations are:
ƒ the systematic identification of emerging opportunities and
threats
ƒ preparedness to meet change
ƒ the specification of sustainable competitive advantage
ƒ improved communication among executives
ƒ reduction of conflicts between individuals and departments
ƒ the involvement of all levels of management in the planning
process
ƒ more appropriate allocation of scarce resources
ƒ consistency of approach across the organization
ƒ a more market-focused orientation across the organization
1 This article is © Malcolm McDonald, 2006, and is used under licence. It also
appears as a chapter in the forthcoming book: Baker, M. J. and Hart, S. (Eds) The
Marketing Book, 6th edn, (Oxford: Butterworth-Heinemann), and is reproduced with
their permission.
2 Correspondence: Professor Malcolm McDonald, Cranfield School of Management,
Cranfield University, Cranfield, Bedford, MK43 0AL

376 The Marketing Review, 2006, 4, 375-418
However; although it can bring many benefits, a strategic marketing plan is
mainly concerned with competitive advantage – that is to say, establishing,
building, defending and maintaining it.
In order to be realistic, it must take into account the organization’s
existing competitive position, where it wants to be in the future, its
capabilities and the competitive environment it faces. This means that the
marketing planner must learn to use the various available processes and
techniques which help to make sense of external trends, and to understand
the organization’s traditional ways of responding to these.
However, this poses the problem regarding which are the most
relevant and useful tools and techniques, for each has strengths and
weaknesses and no individual concept or technique can satisfactorily
describe and illuminate the whole picture. As with a jigsaw puzzle, a sense
of unity only emerges as the various pieces are connected together.
The links between strategy and performance have been the subject of
detailed statistical analysis by the Strategic Planning Institute. The PIMS
(Profit Impact of Market Strategy) project identified from 2600 businesses,
six major links (Buzzell 1987). From this analysis, principles have been
derived for the selection of different strategies according to industry type,
market conditions and the competitive position of the company.
However, not all observers are prepared to take these conclusions at
face value. Like strategy consultants Lubatkin and Pitts (1985), who believe
that all businesses are unique, they are suspicious that something as critical
as competitive advantage can be the outcome of a few specific formulae.
For them, the PIMS perspective is too mechanistic and glosses over the
complex managerial and organizational problems which beset most
businesses.
What is agreed, however, is that strategic marketing planning
presents a useful process by which an organization formulates its strategies,
providing it is adapted to the organization and its environment.
Positioning Marketing Planning with Marketing
Indeed, Smith’s PhD thesis (2003) proved a direct link between
organisational success and marketing strategies that conform to what
previous scholars have agreed constitutes strategy quality, which was shown
to be independent of variables such as size, sector, market conditions and
so on.
This thesis linked superior performance to strategies with the
following qualities:
1. Homogenous market segment definition
2. Segment specific propositions
3. Strategy uniqueness
4. Strength leverage and weakness minimisation
5. Creation of internal and external synergies
6. Provision of tactical guidance
7. Alignment to objectives
8. Alignment to market trends
9. Appropriate resourcing
10.Clear basis of competition

Strategic Marketing Planning: Theory and Practice 377
Let us first, however, position strategic marketing planning firmly within the
context of marketing itself.
As can be deduced from Chapter 1, marketing is a process for:
defining markets; quantifying the needs of the customer groups (segments)
within these markets; determining the value propositions to meet these
needs; communicating these value propositions to all those people in the
organization responsible for delivering them and getting their buy-in to
their role; playing an appropriate part in delivering these value propositions
to the chosen market segments; monitoring the value actually delivered.
For this process to be effective, we have also seen that organizations
need to be consumer/customer-driven.
A map of this process is shown below. This process is clearly cyclical,
in that monitoring the value delivered will update the organization’s
understanding of the value that is required by its customers. The cycle is
predominantly an annual one, with a marketing plan documenting the
output from the ‘understand value’ and ‘determine value proposition’
processes, but equally changes throughout the year may involve fast
iterations around the cycle to respond to particular opportunities or
problems.
It is well known that not all of the value proposition delivering
processes will be under the control of the marketing department, whose
role varies considerably between organizations.
Figure 1. Map of the Marketing Process
Deliver
value
Define markets
& understand
value
Asset
Base
Determine
value
Proposition
Monitor
value

378 The Marketing Review, 2006, 4, 375-418
The marketing department is likely to be responsible for the first two
processes, ‘Understand value’ and ‘Determine value proposition’, although
even these need to involve numerous functions, albeit co-ordinated by
specialist marketing personnel. The ‘Deliver value’ process is the role of the
whole company, including, for example, product development,
manufacturing, purchasing, sales promotion, direct mail, distribution, sales
and customer service. The marketing department will also be responsible for
monitoring the effectiveness of the value delivered.
The various choices made during this marketing process are
constrained and informed not just by the outside world, but also by the
organization’s asset base. Whereas an efficient new factory with much spare
capacity might underpin a growth strategy in a particular market, a factory
running at full capacity would cause more reflection on whether price
should be used to control demand, unless the potential demand warranted
further capital investment. As well as physical assets, choices may be
influenced by financial, human resources, brand and information
technology assets, to name just a few.
Thus, it can be seen that the first two boxes are concerned with
strategic marketing planning processes (in other words, developing market
strategies), whilst the third and fourth boxes are concerned with the actual
delivery in the market of what was planned and then measuring the effect.
Input to this process will commonly include:
ƒ The corporate mission and objectives, which will determine
which particular markets are of interest
ƒ External data such as market research
ƒ Internal data which flow from ongoing operations
Also, it is necessary to define the markets the organization is in, or wishes to
be in, and how these divide into segments of customers with similar needs.
The importance of doing this correctly was emphasised earlier in the
reference to Smith’s 2003 PhD. The choice of markets will be influenced by
the corporate objectives as well as the asset base. Information will be
collected about the markets, such as the market’s size and growth, with
estimates for the future.
The map is inherently cross-functional. ‘Deliver value proposition’, for
example, involves every aspect of the organization, from new product
development through inbound logistics and production to outbound
logistics and customer service.
The map represents best practice, not common practice. Many aspects
of the map are not explicitly addressed by well-embedded processes, even in
sophisticated companies.
Also, the map is changing. One-to-one communications and
principles of relationship marketing demand a radically different sales
process from that traditionally practised. Hence exploiting new media such
as the Internet requires a substantial shift in thinking, not just changes to IT
and hard processes. An example is illuminating. Marketing managers at one
company related to us their early experience with a website which was
enabling them to reach new customers considerably more cost-effectively
than their traditional sales force. When the website was first launched,

Strategic Marketing Planning: Theory and Practice 379
potential customers were finding the company on the Web, deciding the
products were appropriate on the basis of the website, and sending an e-
mail to ask to buy. So far so good. But stuck in a traditional model of the
sales process, the company would allocate the ‘lead’ to a salesperson, who
would phone up and make an appointment perhaps three weeks’ hence.
The customer would by now probably have moved on to another online
supplier who could sell the product today, but those that remained were
subjected to a sales pitch which was totally unnecessary, the customer
having already decided to buy. Those that were not put off would proceed
to be registered as able to buy over the Web, but the company had lost the
opportunity to improve its margins by using the sales force more judiciously.
In time the company realised its mistake: unlike those prospects which the
company identified and contacted, which might indeed need ‘selling’ to,
many new Web customers were initiating the dialogue themselves, and
simply required the company to respond effectively and rapidly. The sales
force was increasingly freed up to concentrate on major clients and on
relationship building.
Having put marketing planning into the context of marketing and
other corporate functions, we can now turn specifically to the marketing
planning process, how it should be done and what the barriers are to doing
it effectively. We are, of course, referring specifically to the second box in
Figure 1.
The Marketing Planning Process
Most managers accept that some kind of procedure for marketing planning
is necessary. Accordingly they need a system which will help them to think
in a structured way and also make explicit their intuitive economic models of
the business. Unfortunately, very few companies have planning systems
which possess these characteristics. However, those that do tend to follow a
similar pattern of steps.
Figure 2 illustrates the several stages that have to be gone through in
order to arrive at a marketing plan. This illustrates the difference between
the process of marketing planning and the actual plan itself, which is the
output of the process, which is discussed later in this chapter
Each of the process stages illustrated in Figure 2 will be discussed in
more detail in this article. The dotted lines joining up stages 5–8 are meant
to indicate the reality of the planning process, in that it is likely that each of
these steps will have to be gone through more than once before final
programmes can be written.
How Formal Should this Process Be?
Although research has shown these marketing planning steps to be
universally applicable, the degree to which each of the separate steps in the
diagram needs to be formalized depends to a large extent on the size and
nature of the company. For example, an undiversified company generally
uses less formalized procedures, since top management tends to have
greater functional knowledge and expertise than subordinates, and because
the lack of diversity of operations enables direct control to be exercised over

380 The Marketing Review, 2006, 4, 375-418
most of the key determinants of success. Thus, situation reviews, the setting
of marketing objectives, and so on, are not always made explicit in writing,
although these steps have to be gone through.
In contrast, in a diversified company, it is usually not possible for top
management to have greater functional knowledge and expertise than
subordinate management, hence planning tends to be more formalized in
order to provide a consistent discipline for those who have to make the
decisions throughout the organization.
Either way, there is now a substantial body of evidence to show that
formalized planning procedures generally result in greater profitability and
stability in the long term and also help to reduce friction and operational
difficulties within organizations.
Johnson and Bailey’s (2000) typology of the different styles of planning
went some way to throwing light on the actual degree of formalisation of
marketing planning processes, although Smith’s 2003 thesis reduced these
to three - visionary processes, rational processes and incremental processes,
with most successful companies using some combination of all three.
Figure 2. The Ten Steps of the Strategic Marketing Planning Process
Where marketing planning has failed, it has generally been because
companies have placed too much emphasis on the procedures themselves
and the resulting forecasts, rather than on generating information useful to
and consumable by management. But more about reasons for failure later.
For now, let us look at the marketing planning process in more detail,
starting with the mission statement.
Step 1 Mission Statement
Figure 2 shows that a strategic marketing plan should begin with a
mission or purpose statement. This is perhaps the most difficult aspect of
marketing planning for managers to master, because it is largely
1
.
Mission
2
.
Corporate Objectives
3
.
Marketing Audit
4
.
SWOT Analyses
5
.
Assumptions
6
.
Marketing Objectives and Strategies
7
.
Estimate Expected Results
8
.
Identify Alternative Plans and Mixes
9
.
Budget
10
.
1st Year Detailed Implementation Programme
Phase One
Goal Setting
Phase Two
Situation Review
Phase Three
Strategy Formulation
Phase Four
Resource Allocation & Monitoring
Measurement
and
Review
The Strategic Plan
(Output of the Planning Process)
Mission Statement
Financial Summary
Market Overview
SWOT Analysis
Assumptions
Marketing Objectives and Strategies
3 Year Forecast and Budgets

Strategic Marketing Planning: Theory and Practice 381
philosophical and qualitative in nature. Many organizations find their
different departments, and sometimes even different groups in the same
department, pulling in different directions, often with disastrous results,
simply because the organization hasn’t defined the boundaries of the
business and the way it wishes to do business.
Here, we can see two levels of mission. One is a corporate mission
statement, the other is a lower level, or purpose statement. But there is yet
another level, as shown in the following summary:
Type 1 ‘Motherhood’ – usually found inside annual reports
designed to ‘stroke’ shareholders. Otherwise of no
practical use.
Type 2 The real thing. A meaningful statement, unique to the
organization concerned, which ‘impacts’ on the behaviour
of the executives at all levels.
Type 3 This is a ‘purpose’ statement (or lower level mission
statement). It is appropriate at the strategic business unit,
departmental or product group level of the organization.
The following is an example of a meaningless, vapid, motherhood-type
mission statement, which most companies seem to have. They achieve
nothing and it is difficult to understand why these pointless statements are
so popular. Employees mock them and they rarely say anything likely to
give direction to the organization. We have entitled this example The
Generic Mission Statement and they are to be avoided.
The following should appear in a mission or purpose statement, which
should normally run to no more than one page:
1 Role or contribution
ƒ Profit (specify), or
ƒ Service, or
ƒ Opportunity seeker
2 Business definition – define the business, preferably in terms of
the benefits you provide or the needs you satisfy, rather than
in terms of what you make.
3 Distinctive competences – these are the essential
THE GENERIC MISSION STATEMENT
Our organization’s primary mission is to protect and increase the value of its owners’
investments while efficiently and fairly serving the needs of its customers.
[...insert organization name...] seeks to accomplish this in a manner that contributes
to the development and growth of its employees, and to the goals of countries and
communities in which it operates.

382 The Marketing Review, 2006, 4, 375-418
skills/capabilities resources that underpin whatever success has
been achieved to date. Competence can consist of one
particular item or the possession of a number of skills
compared with competitors. If, however, you could equally
well put a competitor’s name to these distinctive competences,
then they are not distinctive competences.
4 Indications for the future
ƒ What the firm will do
ƒ What the firm might do
ƒ What the firm will never do
Step 2 Setting Corporate Objectives
Corporate objectives usually contain at least the following elements:
Such a corporate plan, containing projected profit and loss accounts and
balance sheets, being the result of the process described above, is more
likely to provide long-term stability for a company than plans based on a
more intuitive process and containing forecasts which tend to be little more
than extrapolations of previous trends. This process is further summarized
in Figure 3.
Step 3 The Marketing Audit
Any plan will only be as good as the information on which it is based,
and the marketing audit is the means by which information for planning is
organized. There is no reason why marketing cannot be audited in the same
way as accounts, in spite of its more innovative, subjective nature. A
marketing audit is a systematic appraisal of all the external and internal
factors that have affected a company’s commercial performance over a
defined period.
Given the growing turbulence of the business environment and the
shorter product life cycles that have resulted, no one would deny the need
to stop at least once a year at a particular point in the planning cycle to try
to form a reasoned view of how all the many external and internal factors
have influenced performance.
• The desired level of profitability
• Business boundaries
- What kind of products will be sold to what kinds of markets
(marketing)
- What kinds of facilities will be developed (operations, R and D,
information systems, distribution etc.)
- The size and character of the labour force (personnel)
- Funding (finance)
• Other corporate objectives, such as social responsibility, corporate image,
stock market image, employer image, etc.