Essay: The management process in marketing

Introduction

The Chartered Marketing Institute defines marketing as “
that identifies, anticipates and satisfies customer requirements profitably”.

Headquartered in London, UK, M&S is a clothing, foods and homeware retailer operating through company owned as well as franchised markets. The company enjoys presence in some of the major global markets such as the Ireland and Hong Kong. Furthermore, M&S has over 200 franchisees in more than 30 countries.

M&S Vision and Mission Statement

Marks and Spencer’s vision is to be the benchmark for the industry. To uphold this vision, it pursues the mission of allowing access to inspirational quality to everyone. Its values are provision of quality products and services, through innovation and confidence building (Oppapers, 2009).

This report attempts to understand the impact strategy of an organisation has on its marketing plan, and hence define strategic marketing. It then outlines the major components of the marketing plan and the risk associated with it. This is followed by a marketing plan for M&S. The final part of the report identifies how the marketing plan ensures the persuasion of strategy, how commitment can be attained to the plan and it can be reviewed. At the end is a summary of the key findings of the report.

Strategic marketing

Marketing can be defined as a managerial function whose responsibilities include the identification, anticipation and satisfaction of consumer requirements in order to achieve a profit. Hence, marketing is believed to be a technical as well as philosophical subject which addresses issues such as research, product development, pricing, promotion, and distribution. It can hence be deduced that marketing has a wide scope.

A different definition for marketing has been put forth by Doyle (2000). He proposes that “marketing is the management process that seeks to maximize returns to shareholders by creating a competitive advantage in providing, communicating and delivering value to customers thereby developing a long-term relationship with them.” This definition reveals that marketing strategically relates to the long term organisational performance and objectives and providing direction in order to gain a competitive edge. It has to do with applying its resources in a dynamic environment for the satisfaction of consumer wants and at the same time meeting the expectations of its stakeholders. Therefore, marketing strategy has to do with directing its activities in line with the organisational strategies which help to cope with competition, identify opportunities and exploit them through development of products and services ad allocate resources among activities.

A strategy has five elements: it deals with where the company wishes to operate, how it aims to get there, how success will be achieved in the market, how often it desires to change and how profit will be made (Hambrick and Fredrickson 2001).

Hence, the impact of the strategy on marketing is recognised by the need for the reconciliation of the complex market environment and stakeholder expectations with the resources of the organisation and drawing a successful marketing plan based on the reconciliation. In this world of marketing, organizations seek maximization of return to shareholders through the creation of a competitive advantage in identification, provision, communication and deliverance of value to customers, and in the process developing long-term mutually satisfying relationships with those customers.

M&S has previously been recognized for offering customers attractive and superior quality products with the provision of a customer oriented service. M&S’s competitive strategies seemed to be working fine as until the end of 2008, it was considered amongst the biggest and idealistic clothing brands in the United Kingdom with a revenue of 8309.1 million pounds (M&S, 2009a).

However, questions started arising regarding the retailer’s long term success. M&S has been hit with immense competition where competitors are offering upmarket and trendy, but equally priced merchandise. The situation has worsened since discount stores and supermarkets started offering further lower priced clothes. Analysts felt that M&S does not understand its customer’s needs anymore as it is too engrossed in its conventional risk averse strategy, avoiding the dynamics of the environment and having been focused on operational procedures as opposed to forward looking strategic aims, and has an appalling introvert culture. This has been blamed on the promotion of executives from within who have been in the company for a long period, thus, the culture being saturated preventing fresh ideas (Johnson et al, 2008).

Components of marketing plan

The most important aspect of strategic marketing is the marketing plan. The marketing plan defines the activities of the marketing team and provides a framework for its processes. A marketing plan attempts to answer three questions:

1. Where are we right now?
2. What do we want to achieve?
3. How do we intend to achieve it?

Generally, a marketing plan has the following five basic components; analysis, objectives, strategies, tactics and controls.

Step 1 – Analysis

This step involves an analysis of the current situation of the company and its environment. This step attempts to answer the first question, i.e. where are we right now? Such an analysis of the company is called the situation analysis, and is often referred to as marketing audit.

A situation analysis involves analysing the marketing environment, laws and regulations, politics, demand trends, stakeholder interests, resources available and the current state of technology, among numerous other factors.

A number of tools can be used to conduct this analysis. These include:

1. SWOT analysis; an analysis of the internal strengths and weaknesses of the company and how to utilise them in the light of external opportunities and threats faced by the company.
2. PEST analysis; an analysis of the macro environment of the company including political, economic, social and technological factors.
3. Porter’s five forces analysis; an analysis of the competitiveness of an industry using five forces namely threat of new entrants, threat of substitutes, bargaining power of buyers, bargaining power of consumers, and competitive rivalry.

Step 2 – Setting marketing objectives

Marketing objectives answer the second question, i.e. what do we want to achieve? Objectives set should be SMART, to ensure they are not vague and that performance can eventually be measured against the objectives set.

• Specific – specify exactly what the desired outcome is
• Measurable – attaching a quantitative measure to it
• Achievable – reasonably expected to be attained using the available resources
• Realistic – resources available for achievement
• Timed – specify when the outcomes should be realised

The marketing objectives form the basis of the marketing plan and define the boundaries within which the plan should operate.

Step 3 – Describing the target market

This step requires the organisation to undertake a 3 step process labelled by the acronym STP; segmentation, targeting and positioning.

Segmentation means breaking up the market into groups with different identifiable needs. Segmentation can be based on demographics, lifestyle, and geographical area. Once the market has been segmented, the organisation needs to determine which segment it wants to focus its products at. This could be a single segment (niche strategy) or many segments (generic strategy). This process is called targeting. Finally, the product needs to be positioned in the market. This can be done using tools like Boston matrix and Bowmans strategy clock. Positioning defines what image the product wants to present to its customers and forms the basis of the next step – tactics.

Step 4 – Marketing tactics

This step involves writing out detailed strategies for the components of marketing. These components are called the marketing mix and include product (its features), price (what pricing strategy?), place (distribution channels) and promotion (creating awareness, compelling sales).

Step 5 – Marketing controls

Finally, the plan needs to be controlled. Without control procedures, activities are likely to go astray. Control procedures include budgeting and forecasts, non-financial measures and the subsequent follow up of the plan after its implementation.

Risk Issues

By far the most risky component of the marketing plan is the setting of objectives. Most typically objectives are expressed in terms of sales growth, profitability, market share growth and risk diversification. However, organisations experience difficulties and conflicts in establishing objectives which are further magnified by the need to establish multiple objective to meet each group of stakeholder’s needs and at the same time balance them. For example, it is not possible for an organisation to satisfy growth and risk aversion objectives concurrently. Recognising this, Weinberg (1969) has identified eight basic strategic trade-offs that firms need to make:

1. Short term profits versus long term growth
2. Profit margins versus competitive position
3. Direct sales effort versus market development effort
4. Penetration of existing markets versus the development of new markets
5. Related versus non-related new opportunities as a source of long term growth
6. Profit versus non-profit goals
7. Growth versus stability
8. A riskless environment versus a high-risk environment

It follows from this list that while setting objectives, it needs to be explicitly determined which of these objectives has priority. Any failure to do this is likely to lead to conflict and reduce the extent to which the objectives provide useful strategic guidelines. Since the entire marketing plan relies on the definition of these objectives, it is likely to render the plan useless in the event of such a conflict arising. Hence, it is absolutely critical to avoid this risk through a highly reliable objective setting process.

Marketing Plan – M&S

Situation Analysis

Environmental Analysis

Microeconomic information

Consumer Analysis

Whatever the market, young people have become key customers. Over a third of teenagers (and most likely female teenagers) buy fashion accessories in department stores and almost a half of them claim to buy womenswear. On the other hand the teenage response is below average on menswear, suggesting that they are not doing quite such a good job here. There is an opportunity for department stores to attract more young men into their stores too. With the right sort of brands and ambience this should not be too great a challenge and it is in their interests to catch these consumers early (Mintel, 2009). M&S has an enviable target market. The teen market is considered to be somewhat recession proof. Although young woman and teens worked for lower wages they have numerous revenue streams such as babysitting, part time jobs and assistance from parents. Plus, they do not have financial obligations like mortgages or bills to pay and parents are more likely to spend money on their children than on themselves (Gamble and Thompson, 2009).

However, M&S needs to keep track of the changing consumer lifestyles and trends. They should focus on trying to make the store format more appealing. According to marketing expert Pam Danziger, shoppers are rejecting the old concept of hunting and gathering, favoring more involved, interesting and dynamic retail experience (Gamble and Thompson, 2009).

Competitor Analysis

M&S is considered to be a specialty retailer. Retailers in this category sell products in specific merchandise categories (e.g.; apparel, footwear, home furnishings, and jewellery). Numerous small to midsize firms existed with a few large players. Means of survival are by catering to niche markets with distinctive tastes and preferences. M&S has three main competitors.

With 480 stores and operations throughout USA, Middle East, Asia and other European countries, Next offers moderately priced range of clothing and accessories, as well as home furnishings through catalogues, phone and the web having above 2 million active customers (Next plc, 2008).

Based in Sweden, Hennes & Mauritz (H&M) designs, produces and retails clothing items and related accessories. H&M operates over 1300 outlets in around 20 countries. The company offers a range of fashion items under differing values (Hennes & Mauritz, 2009).

Arcadia Group is a clothing retailer that operates approximately 2,000 stores throughout the UK and over 200 franchised stores with seven shopping banners including Wallis, Miss Selfridge, Top shop, Dorothy Perkins, Evans, Outfit and Burton. The company operates in all the continents (Arcadia group, 2009).

Market Analysis

The UK apparel retail market generated total revenues of $62 billion in 2007, Representing a compound annual growth rate (CAGR) of 3.1% for the period spanning 2003-2007 (Datamonitor, 2008).

Macroeconomic information

Environmental Analysis (PESTEL)

Political

• Government Stability
• Strong position in global politics

Economical

• Highly developed economy favoring investment
• Recession

Social

• Income inequality and child poverty
• High education
• High standards of Living

Technological

• Renowned scientific expertise
• Lack of skilled personnel

Environmental

Traditional environmental policy has been based on the ‘command and control’ principle, wherein possible polluters are given certain quotas or standards to meet and the authorities then carefully monitor and strictly deal with any infringements In order to make the entire policy-making process results-oriented, the EPA established a system wherein land, air and water pollution were dealt with separately (Datamonitor, 2009).

Legal

Every business is affected by legislation. Fortunately for M&S the UK legislation is in such a way that gives full priority to businesses. This can be proved by the fact that domestic and foreign investors are continuously striving to do business in the Uk. The majority of multinational corporations based outside of Europe often opt to control their European operations in the UK. The efforts to bribe investors into the country have been done continuously by the government. For example, it was only recently that the government announced that it was planning to restructure its tax system so that it would be even more competitive than before (Datamonitor, 2009).

SWOT Analysis

Strengths

• Strong market position
• Strong brand equity
• Strengthening international market

Weaknesses

• Declining sales in UK
• Weak cash position

Opportunities

• Competitive pricing
• Growth in online retail spending

Threats

• Intense competition
• Increased minimum wages in the UK

Marketing Objectives

Increase visibility of stores by making the store format more exciting, provide better customer service and watch out for competitor moves.

Observations

• Although the market continues to hold a promise M&S have been experiencing negative sales growth. For the fiscal year ended 2008 revenue has declined from 8309.1 million pounds to 8164.3 million pounds, a decrease of 1.77%.
• Should continue to take a fiscally conservative approach; downsize when necessary and modify the business model based on market response.

Based on the main observations the following objectives had been made;

Sales Objectives

• A growth rate in sales of 1.5% for the year 2010, to total in excess of 8286.8 million pounds.
• An average sale per business day (305 days per year) in excess of 27.16 million pounds.
• Reduce the existing credit line.
• Experience an increase in quarterly sales with each news letter.

Profit Objectives

• Maintain a gross margin 38% each year.
• Realize an annual growth of approximately 2.5% in the year 2011.

Market Share Objectives

• Be the first choice for buying clothes among UK consumers.
• Double the number of visits to stores per week from 21 million customers to 42 million customers per week.
• The objectives had been made in relation to M&S company strategies and in reference to appendix 1-the company’s financial statements.

Target Markets

Mintel’s consumer research shows that:

For clothing:

• Penetration levels increase with age up to the over-65s, when they fall back slightly.
• The stores attract far fewer younger people, especially teenagers.
• The stores hold much more appeal among AB and C1 consumers than the lower socio-economic groups.

For food:

• M&S has a somewhat different customer base in food to clothing, with food customers being slightly younger in average age.
• Also in food, the highest appeal is among the higher socio-economic groups, though a little closer to the socio-economic average than in clothing. This may relate to mid-market shoppers choosing M&S food for special occasions.
• 2007

Marketing Strategy

Pricing

Porter’s product “differentiation strategy” (David, 1995) would be used by offering high quality merchandise at reasonable rates. The reason behind is that, so that the competitive strategy and pricing would be consistent with the M&S values; Quality, value, service, innovation and trust. These factors would be achieved by offering the best quality available, convenience and timelessness in acquiring the product. The price would be a little below of other high street retailers but above that of supermarkets, discount retailers and mass merchandisers. Greatly reduced prices might cheapen the M&S brand.

Place

Products would reach customers through opened stores in shopping malls and free standing units across major roads and high streets. Furthermore, products would be sold via direct mailings of catalogs and M&S website which is equipped with shopping cart technology.

Promotion

M&S could use a wide range of communication methods to convey the message to the target audience;

Advertising

– Use posters along roads with models like Kate Moss to enhance the brand image.

Sales promotion activities-

M&S has been weak in attracting the most important market; teenagers and young adults. Teams of designers and marketers should visit student campuses to talk to students and find out what they liked. Atleast two to three new items should be introduced in stores every week. M&S does not have any loyalty card or club. The company should introduce a club so that customers could receive gift cards based on how much they spent. Also, instead of giving special offers and discounts on special occasions such as the Christmas and thanksgiving M&S should invite customers to after hour parties or sponsor concerts and distribute coupons and premiums in these events. This is much likely to attract the younger segment of the market.

This concludes a discussion of the four P’s; product, price, place ( or distribution channels and promotion).

Financial Forecast

The financial impact on a company could be evaluated by forecasting the future sales, cost of sales, marketing costs and administrative costs associated with a strategy before the strategy is implemented. One approach to estimating the financial impact of the marketing strategy is to develop a proforma income statement for a specific time scale using estimation of sales and costs associated with it (David, 1998). The forecast of the key values for 2011 is outlined below.

Key values	2011
Gross margin	38.9%
Net margin	13.4%
Net margin excluding property disposals and exceptional items profitability	12.2%
Basic earnings per share	49.1p
Dividend per share	40.4p
Dividend cover	2.1x
Return on equity	46.3%
Retail gearing	59.1%
Retail fixed charge cover	5.9x
Net debt	1,949.5 million
Capital expenditure	652 million

Implementation

Mile stones start date end date Department

Advertising

Nationwide Poster Campaign 10/9/2009 3/3/2010 Marketing

Sales Promotion

Student campus Visits 10/11/2009 Continuous Marketing

Loyalty Cards 10/11/2009 Continuous Marketing

M&S club 10/11/2009 Continuous Marketing

Gaining agreement

Successful implementation of marketing strategy is not easy. If implementation is left to compete with the internal pressure of coping with the crises, reacting to competitors’ actions, company politics, personal career needs, and other similar factors, it is likely to fail.

Some of the problems in achieving the proposed objectives, as mentioned by Kotler (1997) could be;

• Cash flow or capital shortages
• Personnel deficiencies like the availability of skilled staff
• Strong competitors
• Declining sales due to recession
• It might be difficult to re establish the brand image towards the youth as young consumers have already lost confidence in M&S.

The implementation process poses a fundamental dilemma, since to be effective it requires the reconciliation of two opposing forces: forces leading to organisational integration and force leading to organisational segmentation (Lawrence and Lorsch, 1967). In seeking to achieve this balance, it is helpful if:

1. The messages contained in the plan are communicated so that there is clear recognition of what the plan says
2. The plan is understood, so that all who need to play a role in its implementation are aware of what their roles are
3. There is consensus about the wisdom of pursuing the plan in order to secure commitment to its accomplishment.

A flow chart showing how a strategic marketing plan might be implemented is shown below. This flow chart suggests that there are a number of key elements within the organisation that need to be matched with the plan in order to lead it to success. These elements are:

• Leadership
• Organisational culture
• Organisational structure
• Functional policies
• Resources
• Evaluation and control procedures

There is a logical sequence of the elements, although in practice some may occue simultaneously or in a different order.

Evaluation & Review – Variance Analysis

Variance analysis is the evaluation of performance by means of variances, whose timely reporting increases the opportunity for remedial action. Variance analysis involves the calculation of variances or divergences between actual performance and budgeted performance. It enables managers to identify problems which need further investigation with a view to implementing remedial action. Variances can be both positive and negative. However, both positive and negative variances should be reported as well as investigated. This allows positive performance to be identified and repeated and negative performance to be identified and minimised. For M&S, these variances would be measured from the key values identified above in the financial forecast of the marketing plan. Any divergences would be reported and the cause investigated and remdied in order to control the process.

Conclusion

Marketing is the management process that seeks to maximize returns to shareholders by creating a competitive advantage in providing, communicating and delivering value to customers thereby developing a long-term relationship with them. Marketing strategically relates to the long term organisational performance and objectives and providing direction in order to gain a competitive edge. It has to do with applying its resources in a dynamic environment for the satisfaction of consumer wants and at the same time meeting the expectations of its stakeholders.

Marks and Spencer’s vision is to be the benchmark for the industry. To uphold this vision, it pursues the mission of allowing access to inspirational quality to everyone. Its values are provision of quality products and services. In order to pursue this mission and vision, a marketing plan has been outlined above. It aims to do extensive promotion and advertisement to improve awareness and regain its position as market leader which it was beginning to lose recently. The main components of the marketing plan are the situational analysis, the marketing objectives, the action plan and the financial forecast. In order to achieve the plan, acceptance for the plan needs to be achieved through communication and understanding for the plan. Finally, the plan would be evaluated and reviewed using the variance analysis to ensure the plan is being enacted upon.

Using the above marketing plan and understanding the strategic implications of marketing, M&S can regain its position as a market leader.