Marketing Plan

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A marketing plan is a written document that details the necessary actions to achieve one or more marketing objectives. It can be for a product or service, a brand, or a product line. It can cover one year (referred to as an annual marketing plan), or cover up to 5 (sometimes referred to as five) years.

A marketing plan may be part of an overall business plan. Solid marketing strategy is the foundation of a well-written marketing plan. While a marketing plan contains a list of actions, a marketing plan without a sound strategic foundation is of little use.

The marketing planning process In most organizations, "strategic planning" is an annual process, typically covering just the year ahead. Occasionally, a few organizations may look at a practical plan which stretches three or more years ahead.

To be most effective, the plan has to be formalized, usually in written form, as a formal `marketing plan'. The essence of the process is that it moves from the general to the specific; from the overall objectives of the organization down to the individual Objective (goal) for a part of one marketing programme. It is also an iteractive process, so that the draft output of each stage is checked to see what impact it has on the earlier stages - and is amended accordingly.

Corporate mission Behind the corporate objectives, which in themselves offer the main context for the marketing plan, will lie the 'corporate mission'; which in turn provides the context for these corporate objectives. This `corporate mission' can be thought of as a definition of what the organization is; of what it does: 'Our business is …'.

This definition should not be too narrow, or it will constrict the development of the organization; a too rigorous concentration on the view that `We are in the business of making meat-scales',as IBM was during the early 1900s, might have limited its subsequent development into other areas. On the other hand, it should not be too wide or it will become meaningless; `We want to make a profit' is not too helpful in developing specific plans.

Abell suggested that the definition should cover three dimensions: 'customer groups' to be served, 'customer needs' to be served, and 'technologies' to be utilized.D. Abell, 'Defining the Business: The Starting Point of Strategic Planning' (Prentice-Hall, 1980)

Thus, the definition of IBM's `corporate mission' in the 1940s might well have been: `We are in the business of handling accounting information need for the larger US organizations group by means of Punch card .' Fortunately, as the name itself (InternationalBusiness Machines) indicates, IBM already had a wider perspective (and its corporate mission was virtually defined by its name).Planning is the key element of the management function

Corporate vision Perhaps the most important factor in successful marketing is the `corporate vision'. Surprisingly, it is largely neglected by marketing textbooks; although not by the popular exponents of corporate strategy - indeed, it was perhaps the main theme of the book by Peters and Waterman, in the form of their `Superordinate Goals'.T. J. Peters and R. H. Waterman, 'In Search of Excellence' (Harper & Row, 1982) Theodore Levitt said: "Nothing drives progress like the imagination. The idea precedes the deed."T. Levitt, 'The Marketing Imagination' (Free Press, 1986)

If the organization in general, and its chief executive in particular, has a strong vision of where its future lies, then there is a good chance that the organization will achieve a strong position in its markets (and attain that future). This will be not least because its strategies will be consistent; and will be supported by its staff at all levels. In this context, all of IBM's marketing activities were underpinned by its philosophy of `customer service'; a vision originally promoted bythe charismatic Watson dynasty.

Henry Mintzberg explained: "... in some cases, in addition to the mission there is the `senseof mission', that is, a feeling that the group has banded together to create something new and exciting. This is common in new organizations".H. Mintzberg, 'Power in and around Organizations'(Prentice-Hall, 1983)

What a worthwhile vision consists of is, however, usually open to debate; hence the reason why such visions tend to be associated with strong, Charismatic authority. But the vision must berelevant. The message for the marketer is that, to be most effective, theMarketing strategy must be converted into a powerful long-termvision; if such a vision does not already exist.

Objectives for non-profit-making organizations In the case of non-profit organizations the objectives may be less than clear. Keith Blois suggested five main reasons for the differences from `commercial' organizations:K. J. Blois, Managing for non-profit organizations, 'The Marketing Book', ed. M. J. Baker (Heinemann, 1987)

Ambiguous Goals actors and groups of actors are involved

Lack of Agreement in Means-End Relationships where there is consensus on the goal there may be disagreement on how to get there

Environmental Turbulence organizations seem to be exposed more to turbulence than commercial ones

Unmeasurable Outputs by definition, non-profit organizations do not have the classically convenient simplicity of `bottom-line profit'

The Effects of Management Intervention are Unknown lack of precision caused by factors 1-4 is problem enough, but the `culture' seems to add further barriers to managing these organizations

Even so, Kotler and Andreasen suggested some possible objectives for such organizations:P. Kotler and A. R. Andreasen, 'Strategic Marketing for Nonprofit Organizations' (Prentice-Hall, 1987)

Surplus Maximization to profit maximization

Revenue Maximization for profit-making organizations

Usage Maximization the numbers of users and their usage

Usage Targeting the capacity available

Full Cost Recovery even

Partial Cost Recovery the subsidy

Budget Maximization what is offered

Producer Satisfaction Maximization the wants of staff

Marketing audit The first formal step in the marketing planning process is that of conducting the marketing audit. Ideally, at the time of producing the marketing plan, this should only involve bringing together the source material which has already been collected throughout the year - as part of the normal work of the marketing department.

The emphasis at this stage is on obtaining a complete and accurate picture. In a single organization, however, it is likely that only a few aspects will be sufficiently important to have any significant impact on the marketing plan; but all may need to be reviewed to determine just which 'are' the few.

In this context some factors related to the customer, which should be included in the material collected for the audit, may be:

Who are the customers?

What are their key characteristics?

What differentiates them from other members of the population?

What are their needs and wants?

What do they expect the `product' to do?

What are their special requirements and perceptions?

What do they think of the organization and its products or services?

What are their attitudes?

What are their buying intentions?

A `traditional' - albeit product-based - format for a `brand reference book' (or, indeed, a `marketing facts book') was suggested by Godley more than three decades ago:

Financial data --Facts for this section will come from management accounting, costing and finance sections.

Product data --From production, research and development.

Sales and distribution data - Sales, packaging, distribution sections.

Advertising, sales promotion, merchandising data - Information from these departments.

Market data and miscellany - From market research, who would in most cases act as a source for this information.

His sources of data, however, assume the resources of a very large organization. In most organizations they would be obtained from a much smaller set of people (and not a few of them would be generated by the marketing manager alone). It is apparent that a marketing audit can be a complex process, but the aim is simple: 'it is only to identify those existing (external and internal) factors which will have a significant impact on the future plans of the company'.

It is clear that the basic material to be input to the marketing audit should be comprehensive. Accordingly, the best approach is to accumulate this material continuously, as and when it becomes available; since this avoids the otherwise heavy workload involved in collecting it as part of the regular, typically annual, planning process itself - when time is usually at a premium. Even so, the first task of this `annual' process should be to check that the material held in the current `factsbook' or `facts files' actually 'is' comprehensive and accurate, and can form a sound basis for the marketing audit itself.

The structure of the facts book will be designed to match the specific needs of the organization, but one simple format - suggested by Malcolm McDonald - may be applicable in many cases. This splits the material into three groups:

'Review of the marketing environment'. A study of the organization's markets, customers, competitors and the overall economic, political, cultural and technical environment; covering developing trends, as well as the current situation.

'Review of the detailed marketing activity'. A study of the company's marketing mix; in terms of the 4 Ps - product, price, promotion and place.

'Review of the marketing system'. A study of the marketing organization, marketing research systems and the current marketing objectives and strategies.

The last of these is too frequently ignored. The marketing system itself needs to be regularly questioned, because the validity of the whole marketing plan is reliant upon the accuracy of theinput from this system, and `garbage in, garbage out' applies with a vengeance.

Analysis The analysis of this material will, no doubt, require significant effort. In the first instance it is a matter of selection, of sorting the wheat from the chaff. What is important, and will need to be taken into account in the marketing plan that will eventually emerge from the overall process, will be different for each product or service in each situation. One of the most important skills to be learned in marketing is that of being able to concentrate on just what is important.

It is important to say not just what happened but why. The process of marketing planning encompasses all of the marketing skills. However, a number of these may be particularly relevant at this stage:

'Positioning'. The starting point of the marketing plan must be the consumer. It is a matter of definition that his or her needs should drive the whole marketing process. The techniques of positioning and segmentation therefore usually offer the best starting point for what has to be achieved by the whole planning process.

'Portfolio planning'. In addition, the coordinated planning of the individual products and services can contribute towards the balanced portfolio.

'80:20 rule'. To achieve the maximum impact, the marketing plan must be clear, concise and simple. It needs to concentrate on the 20 per cent of products or services, and on the 20 per cent of customers, which will account for 80 per cent of the volume and 80 per cent of the `profit'.

'4 Ps': Product, Place, Price and Promotion. The 4 Ps can sometimes divert attention from the customer, but the framework they offer can be very useful in building the action plans.

Marketing objectives It is only at this stage (of deciding the marketing objectives) that the active part of the marketing planning process begins'.

This next stage in marketing planning is indeed the key to the whole marketing process. The marketing objectives state just where the company intends to be; at some specific time in the future. James Quinn succinctly defined objectives in general as: "Goals (or objectives) state 'what' is to be achieved and 'when' results are to be accomplished, but they do not state 'how' the results are to be achieved".J. B. Quinn, 'Strategies for Change: Logical Incrementalism' (Richard D. Irwin, 1980)

They typically relate to what products (or services) will be where in what markets (and must be realistically based on customer behaviour in those markets). They are essentially about the match between those 'products' and 'markets'. Objectives for pricing, distribution, advertising and so on areat a lower level, and should not be confused with marketing objectives. They are part of the marketing strategy needed to achieve marketing objectives.

To be most effective, objectives should be capable of measurement and therefore 'quantifiable'. This measurement may be in terms of sales volume, money value, market share, percentage penetration of distribution outlets and so on. An example of such a measurable marketing objective might be `to enter the market with product Y and capture 10 per cent of the market by value within one year'. As it is quantified it can, within limits, be unequivocally monitored; and Corrective Action taken as necessary.

The marketing objectives must usually be based, above all, on the organization's financial objectives; converting these financial measurements into the related marketing measurements.

In marketing, objectives are often built using the SMART (project management) acronym.

It is conventionally assumed that marketing objectives will be designed to maximize volume or profit (or to optimize the utilization of resources in the non-profit sector), by creating demand or rejuvenating existing demand, say; although the various sub-objectives may indicate many different routes to achieving such optimization. However, as Kotler suggested (in the earlier edition of his book), there may be a number of other objectives:P. Kotler, 'Marketing Management' (Prentice-Hall, 3rd edn, 1976)

Synchromarketing

Demarketing

Counter-marketing

Synchromarketing - The aim may be to `redistribute' existing sales (which are already at optimum levels) so that they occur at times, or in places, which the supplier prefers. Thus, for example, organizations which have highly seasonal sales (which make inefficient use of resources) may want to increase non-seasonal sales. Walls achieved this by balancing its summer sales of ice-cream with pies and sausages, demand for which peaks in winter. The suppliers of central-heating oil offer special deals for those customers willing to restock their tanks in summer.

Demarketing' - Demand may sometimes exceed supply. In these circumstances the emphasis will be on rationing scarce supplies. Occasionally the supplier, rather than bring on-stream expensive new plant, may seek to persuade customers to buy less (or be less dissatisfied with the scarcity). Some suppliers of electrical energy (electricity generators in Europe and the USA) have heavily advertised energy conservation measures to achieve this end (otherwise, the cost of meeting the peak winter loads would be very high - and unprofitable).

Counter-marketing - In what is usually a Public sector activity (but is occasionally undertaken by the private sector, where some uses of a product are damaging the corporate image), there may be an objective of stopping consumption completely. The anti-tobacco and anti-drug campaigns are the most obvious examples; but McDonald's campaigns to stop its customers dropping litter, or the brewers' campaigns to stop Driving under the influence, fall into this category.

Emergent strategy In this case, the intended strategy, decided upon traditionally or incrementally, is overtaken by events in two main ways. One, which will probably be recognized by the organization, is that of unrealized strategy; where it proves impossible to implement the chosen strategy in practice.

Less obvious is the emergent strategy which is decided by events in the external environment; and, thus, forced upon the organization. This may not necessarily be recognized, in its totality, by the organization - since many of its implications may be hidden. As markets become more complex, however, such emergent strategies are becoming more common.

Many organizations see both these processes in terms of failure - they have been forced, usually by unpredictable events, to abandon their own strategy. There is, accordingly, a tendency for these unwelcome facts to be ignored until they are so obvious that they cannot be avoided. This is a major error. Such deviations must be recognised (probably through one or other form of environmental analysis coupled with networking) as soon as possible- so that the organization can react in good time.

A much more powerful approach is, though, to be proactive; so seize upon these deviations as the basis for future developments. What needs to be recognized is that emergent strategies are the most powerful of all. They must, by definition, be directly derived from the needs of the market - where even successful deliberate strategies may not ideally match market needs but may achieve their targets by sheer force (especially where conviction marketing lies behind them). Emergent strategies are, thus, likely to be vigorous ones.

There are two main approaches to capitalizing on such emergent strategies. The first of these, favored in the West, is the umbrella strategy. This is a form of very positive delegation, in that the overall strategies, the umbrella, are very general in nature - and allow the lower level managers, who are closest to the external environment, the freedom to react to these changes.

A much more direct, and hence even more powerful, approach is that favored by the Japanese corporations. They integrate emergent strategies with their own. Indeed it is arguable that, in terms of marketing, to a large extent they use emergent strategies instead of their own deliberate strategies. This is evidenced as much by an attitude of mind as by any other feature. They deliberately go out to look for symptoms of such emergent trends which can be detected in the performance of their own products. More than that, though, they often deliberately launch a range of products rather than a single one to see which is most successful. It is almost as if they deliberately seek out the emergent strategies by offering the best environment for them to develop - the very reverse of the Western approach which seeks to avoid them. The Japanese then go on to build on these emergent strategies with a number of very effective tools - most of which are designed to overcome the major problem which accompanies emergent strategies, that they emerge on the scene much later than deliberate ones (and are likely to be visible to all the competitors at the same time) so that time is the essence. Thus, time management techniques (including parallel development along with flexible manufacturing and JIT) which have been developed by the Japanese offer them a significant Sustainable competitive advantage in handling such emergent strategies.

Marketing strategies There are numerous definitions of what strategy is, but again James Quinn gave a succinct general definition: "A strategy is a 'pattern' or 'plan' that 'integrates' an organization's 'major' goals, policies and action sequences into a 'cohesive' whole"J. B. Quinn, 'Strategies for Change: Logical Incrementalism' (Richard D. Irwin, 1980)

He went on to explain his view of the role of `policies', with which strategy is most often confused: "Policies are rules or guidelines that express the 'limits' within which action should occur.

Simplifying somewhat, marketing strategies can be seen as the means, or `game plan', by which marketing objectives will be achieved and, in the framework that we have chosen to use, are generally concerned with the 4 Ps. Examples are:

PRODUCT

developing new products, repositioning or relaunching existing ones and scrapping old ones

adding new features and benefits

balancing product portfolios

changing the design or packaging

PRICE

setting the price to skim or to penetrate

pricing for different market segments

deciding how to meet competitive pricing

PROMOTION

specifying the advertising platform and media

deciding the public relations brief

organizing the salesforce to cover new products and services or markets

PLACE

choosing the channels

deciding levels of customer service

In principle, these strategies describe how the objectives will be achieved. The 4 Ps are a useful framework for deciding how the company's resources will be manipulated (strategically) to achieve the objectives. It should be noted, however, that they are not the only framework, and may divert attention from the real issues. The focus of the strategies must be the objectives to be achieved - not the process of planning itself. Only if it fits the needs of these objectives should you choose, as wehave done, to use the framework of the 4 Ps.

The strategy statement can take the form of a purely verbal description of the strategic options which have been chosen. Alternatively, and perhaps more positively, it might include a structured list of the major options chosen.

One aspect of strategy which is often overlooked is that of 'timing'. Exactly when it is the best time for each element of the strategy to be implemented is often critical. Taking the right action at the wrong time can sometimes be almost as bad as taking the wrong action at the right time. Timing is, therefore, an essential part of any plan; and should normally appear as a schedule of planned activities.

Having completed this crucial stage of the planning process, you will need to re-check the feasibility of your objectives and strategies in terms of the market share, sales, costs, profits and so on which these demand in practice. As in the rest of the marketing discipline, you will need to employ judgement, experience, market research or anything else which helps you to look at your conclusions from all possible angles.

Detailed plans and programmes At this stage, you will need to develop your overall marketing strategies into detailed plans and programmes. Although these detailed plans may cover each of the 4 Ps, the focus will vary, depending upon your organization's specific strategies. A product-oriented company will focus its plans for the 4 Ps around each of its products. A market or geographically oriented company will concentrate on each market or geographical area. Each will base its plans upon the detailed needs of its customers, and on the strategies chosen to satisfy these needs.

Again, the most important element is, indeed, that of the detailed plans; which spell out exactly what programmes and individual activities will take place over the period of the plan (usually over the next year). Without these specified - and preferably quantified - activities the plan cannot be monitored,even in terms of success in meeting its objectives.

It is these programmes and activities which will then constitute the `marketing' of the organization over the period. As a result, these detailed marketing programmes are the most important, practical outcome of the whole planning process. These plans should therefore be:

Clear - They should be an unambiguous statement of 'exactly' what is to be done.

Quantified - The predicted outcome of each activity should be, as far as possible, quantified; so that its performance can be monitored.

Focused - The temptation to proliferate activities beyond the numbers which can be realistically controlled should be avoided. The Pareto principle applies in this context too.

Realistic - They should be achievable.

Agreed - Those who are to implement them should be committed to them, and agree that they are achievable.

The resulting plans should become a working document which will guide the campaigns taking place throughout the organization over the period of the plan. If the marketing plan is to work, everyexception to it (throughout the year) must be questioned; and the lessons learned, to be incorporated in the next year's plan.

Content of the marketing plan Small business A marketing plan for a small U.S. business typically includesU.S. Small Business Administration Marketing Plan Outline Accessed 30 March 2007.

Demographics of customers

Description of competitors, including the level of demand for the product or service and the strengths and weaknesses of competitors

Description of the product or service, including special features

Marketing budget, including the advertising and promotional plan

Description of the business location, including advantages and disadvantages for marketing

Pricing strategy

Market Segmentation

Medium-sized and large organizations The main contents of a marketing plan are:

Executive Summary

Situational Analysis

Opportunities / Issue Analysis - SWOT Analysis

Objectives

Strategy

Action Programme (the operational marketing plan itself for the period under review)

Financial Forecast

Controls

In detail, a complete marketing plan typically includes:

Title page

Executive Summary

Current Situation - environmental scanning

economy
legal
government
technology
ecological
sociocultural
supply chain

Current Situation - industry or market research

market definition
market size
market segmentation
industry structure and strategic groupings
Porter 5 forces analysis
competition and market share
competitor analysis
market trends

Current Situation - Consumer Analysis Quick MBA Marketing plan based on consumer and competitor analyses

nature of the buying decision
participants
demographics
psychographics
buyer motivation and expectations
loyalty segments

Current Situation - Internal

company resources

financial
people
time
skills

objectives

mission statement and vision statement
corporate objectives
financial objective
marketing objectives
long term objectives
description of the basic business philosophy

corporate culture

Summary of Situation Analysis

external threats
external opportunities
internal strengths
internal weaknesses
Critical success factors in the industry
our sustainable competitive advantage

Marketing research

information requirements
research methodology
research results

Marketing Strategy - Product management

product line
product strengths and weaknesses

perceptual mapping

Product Life Cycle Management and new product development
brand, brand image, and brand equity
the product (business)
product Product portfolio analysis

B.C.G. Analysis
contribution margin analysis
G.E. Multi Factoral analysis
Quality Function Deployment

Marketing Strategy Marketing plan basics Table of marketing targets, actions, means and results - Market segment marketing actions and market share objectives

by product,
by customer segment,
by geographical market,
by distribution channel.

Marketing Strategy - Pricing

pricing objectives
pricing method (eg.: cost plus, demand based, or competitor indexing)
pricing strategy (eg.: skimming, or penetration)
discounts and allowances
price elasticity of demand and customer sensitivity
geographical pricing
break even analysis at various prices

Marketing Strategy - promotion (marketing)

promotional goals
promotional mix
advertising reach, frequency, flights, theme, and media
sales requirements, techniques, and management
sales promotion
publicity and public relations
electronic promotion (eg.: e-marketing, or direct marketing)
word of mouth marketing (buzz)
viral marketing

Marketing Strategy - Distribution (business)

geographical coverage
distribution channels
physical distribution and logistics
electronic distribution

Implementation

personnel requirements

assign responsibilities
give incentives
training on selling methods

financial requirements
management information systems requirements
month-by-month agenda

Program Evaluation and Review Technique or critical path analysis

monitoring results and benchmarks
adjustment mechanism
contingencies (What if's)

Financial Summary

assumptions
pro-forma monthly income statement
contribution margin analysis
breakeven analysis
Monte Carlo methods in finance
ISI: Internet Strategic Intelligence

Scenarios

Prediction of Future Scenarios
Plan of Action for each Scenario

Appendix

pictures and specifications of the new product
results from research already completed

Measurement of Progress The final stage of any marketing planning process is to establish targets (or standards) so that progress can be monitored. Accordingly, it is important to put both quantities and timescales into the marketing objectives (for example, to capture 20 per cent by value of the market within two years) and into the corresponding strategies.

Changes in the environment mean that the forecasts often have to be changed. Along with these, the related plans may well also need to be changed. Continuous monitoring of performance, againstpredetermined targets, represents a most important aspect of this. However, perhaps even more important is the enforced discipline of a regular formal review. Again, as with forecasts, in many cases the best (most realistic) planning cycle will revolve around a quarterly review. Best of all, at least in termsof the quantifiable aspects of the plans, if not the wealth of backing detail, is probably a quarterly rolling review - planning one full year ahead each new quarter. Of course, this does absorb more planning resource; but it also ensures that the plans embody the latest information, and - with attention focused on them so regularly - forces both the plans and their implementation to be realistic.

Plans only have validity if they are actually used to control the progress of a company: their success lies in their implementation, not in the writing'.

Performance analysis The most important elements of marketing performance, which are normally tracked, are:

Sales analysis Most organizations track their sales results; or, in non-profit organizations for example, the number of clients. The more sophisticated track them in terms of 'sales variance' - the deviation from the target figures - which allows a more immediate picture of deviations to become evident. `Micro-analysis', which is a nicely pseudo-scientific term for the normal management process of investigating detailed problems, then investigates the individual elements (individual products, sales territories, customers and so on) which are failing to meet targets.

Market share analysis Relatively few organizations, however, track market share. In some circumstances this may well be a much more important measure. Sales may still be increasing, in an expanding market, while share is actually decreasing - boding ill for future sales when the market eventually starts to drop. Where such market share is tracked, there may be a number of aspects which will be followed:

overall market share
segment share - that in the specific, targeted segment
relative share -in relation to the market leaders

Expense analysis The key ratio to watch in this area is usually the `marketing expense to sales ratio'; although this may be broken down into other elements (advertising to sales, sales administration to sales, and so on).

Financial Analysis The `bottom line' of marketing activities should at least in theory, be the net profit (for all except non-profit organizations, where the comparable emphasis may be on remaining within budgeted costs). There are a number of separate performance figures and key ratios which need to be tracked:

gross contributionnet profit
gross profitreturn on investment
net contributionprofit on sales

There can be considerable benefit in comparing these figures with those achieved by other organizations (especially those in the same industry); using, for instance, the figures which can beobtained (in the UK) from `The Centre for Interfirm Comparison'. The most sophisticated use of this approach, however, is typically by those making use of PIMS (Profit Impact of Management Strategies), initiated by the General Electric Company and then developed by Harvard Business School, but now run by the Strategic Planning Institute.

The above performance analyses concentrate on the quantitative measures which are directly related to short-term performance. But there are a number of indirect measures, essentially tracking customer attitudes, which can also indicate the organization's performance in terms of its longer-term marketing strengths and may accordingly be even more important indicators. Some useful measures are:

market research - including customer panels (which are used to track changes over time)
lost business - the orders which were lost because, for example, the stock was not available or the product did not meet the customer's exact requirements
customer complaints - how many customers complain about the products or services, or the organization itself, and about what

Use of Marketing Plans A formal, written marketing plan is essential; in that it provides an unambiguous reference point foractivities throughout the planning period. However, perhaps the most important benefit of these plans is the planning process itself. This typically offers a unique opportunity, a forum, for `information-rich' and productively focused discussions between the various managers involved. The plan, together with the associated discussions, then provides an agreed context for their subsequent management activities, even for those not described in the plan itself.

Budgets as Managerial Tools The classic quantification of a marketing plan appears in the form of budgets. Because these are so rigorously quantified, they are particularly important. They should, thus, represent an unequivocal projection of actions and expected results. What is more, they should be capable of being monitored accurately; and, indeed, performance against budget is the main (regular) management review process.

The purpose of a marketing budget is, thus, to pull together all the revenues and costs involved in marketing into one comprehensive document. It is a managerial tool that balances what is needed to be spent against what can be afforded, and helps make choices about priorities. It is then used inmonitoring performance in practice.

The marketing budget is usually the most powerful tool by which you think through the relationship between desired results and available means. Its starting point should be the marketing strategies and plans, which have already been formulated in the marketing plan itself; although, in practice, the two will run in parallel and will interact. At the very least, the rigorous, highly quantified, budgets may cause a rethink of some of the more optimistic elements of the plans.

Approaches to budgeting Many budgets are based on history. They are the equivalent of `time-series' forecasting. It is assumed that next year's budgets should follow some trend that is discernible over recent history. Other alternatives are based on a simple `percentage of sales' or on `what the competitors are doing'.

However, there are many other alternatives - Ven:

Affordable - This may be the most common approach to budgeting. Someone, typically the managing director on behalf of the board, decides what is a `reasonable' promotional budget; what can be afforded. This figure is most often based on historical spending. This approach assumes that promotion is a cost; and sometimes is seen as an avoidable cost.
Percentage of revenue - This is a variation of `affordable', but at least it forges a link with sales volume, in that the budget will be set at a certain percentage of revenue, and thus follows trends in sales. However, it does imply that promotion is a result of sales, rather than the other way round.

Both of these methods are seen by many managements to be `realistic', in that they reflect the reality of the business strategies as those managements see it. On the other hand, neither makes any allowance for change. They do not allow for the development to meet emerging market opportunities and, at theother end of the scale, they continue to pour money into a dying product or service (the `dog').

Competitive parity - In this case, the organization relates its budgets to what the competitors are doing: for example, it matches their budgets, or beats them, or spends a proportion of what the brand leader is spending. On the other hand, it assumes that the competitors know best; in which case, the service or product can expect to be nothing more than a follower.
Zero-based budgeting - In essence, this approach takes the objectives, as set out in the marketing plan, together with the resulting planned activities and then costs them out. Differences between marketing and business plans.

References

H. A. Simon, Rational decision making in business organisations, 'American Economic Review' (September 1979)
J. Pfeffer and G. R. Salancik, 'The External Control of Organizations' (Harper & Row, 1978)