Chapter 15

Marketing planning

Lecture objectives Understand the contexts and types of marketing

planning in hospitality organizations

Describe a generic process for marketing planning

Carry out the research needed to develop a strategic marketing plan

Explain how analytical tools are used to evaluate a hospitality business’s current and potential situation

Recognize the limitations of marketing planning and the importance of contingency planning

Introduction Planning is widespread in businesses of all sizes

Larger companies have formalized planning processes, smaller companies perform planning essentials

A plan sets out what a company wants to achieve and how it is going to achieve it

The essence of planning is a goal with accompanying strategies and tactics

The goal defines what the company wants to achieve

The strategy and tactics set out how the goal will be achieved

A marketing plan sets out the marketing objectives that a company wants to achieve and the strategy and tactics that will be used to reach the objectives

Hierarchy company plansCorporate marketing planning Complex hospitality organizations produce strategic marketing

plans at the highest corporate level to make strategic decisions (which geographic markets to enter, which hospitality formats to offer in those markets, market entry strategies)

Decisions are implemented at divisional level

Divisional marketing planning Focuses on goals of major division in hospitality company A division is profit centre with core branded businesses, led by

management team who produce marketing plans for each brand to deliver sales, profit, growth goals

Divisions are responsible to Corporate Executives and set brand standards for units

Unit marketing planning Hospitality operational unit – a hotel or a restaurant Goals and strategies focus on implementing brand standards such

as targeting, positioning and developing strong pre-encounter, encounter and post-encounter marketing mixes

Types of marketing planStrategic marketing plans (SMP)

Focus on long-term goals (3- to 5-years) Objectives to build market share, building yield and growing

revenues Strategic decisions on market segmentation, target markets

and market positioning, and brand standards

Tactical marketing plans (TMP) Operates short time-frame (1 year or less) TMP subordinate to SMP and operates within boundaries set

by STP TMPs consist primarily of campaigns and events – unit or

department Campaign is short term promotion Campaigns have carefully targeted and timed

customer/prospect communications

Marketing plan structure

Vision, mission, values Situation audit Objectives STP Marketing mix Budgeting Implementation Controls Evaluation

Vision, mission, valuesLeading hospitality companies develop vision statements, mission statements or sets of values

These are statements about: what the organization is en route to becoming in 10

years or more (the vision statement) why the organization exists (the mission statement) how the organization shall act in relationships with its

stakeholders, such as shareholders, customers, employees and the local community (the values statement)

Many organizations have policies like these but merge them into a single generic mission statement that contains elements of all three

Mission statementPurpose to enable top management to provide:

focus for the future direction of the company link with the company’s short- and medium-term objectives,

and the long-term goals of the organization tool for communicating top management’s perception of

the company’s future with its various stakeholders

Mission statement can include: definition of broad scope of the business, the markets

served, the products and services offered and the distinctive benefits provided by the organization to its customers

summary of the distinctive competences the business has developed

description of the desired market position vis-à-vis competitors

clear statement about the company’s values

Figure 15.1 Prêt à Manger’s mission statement

Situation audit: ‘where are we now?’

Need to carry out research into the company, and its environment, to answer the question ‘where are we now?’

Should be written as brief factual statements covering key aspects of hospitality business

Two sections of the situation audit are: internal audit external audit

Key issues summarized in a SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis

Internal audit Assesses all aspects of the hospitality unit’s operations

Aims to establish what the business is doing well – the strengths

What parts of the business are performing poorly – the weaknesses

Managers often can identify their business’s strengths and know their weaknesses; but difficulty is recognizing the difference between the symptoms of the problem (e.g. low food sales) and the cause of the problem (unpopular menu items, high prices, poor food production system)

Identifying causes of the problem, actions taken to correct poor performance

Strengths and weaknesses identified by vertical analysis (e.g. within business functions – finance, operations, marketing, human resources) or using marketing mix

BCGBoston Consulting Group (BCG) matrix analytical approach to assessing cash flow, based on relative market share and market growth for SBUs

Star (high market growth/high relative market share): company needs to reinvest the cash generated to maintain brand’s position all cash generated by a star is reinvested in the star

Cash cow (growth/high relative market share): cash cows generate cash and high profits because of economies of scale profits generated are reinvested by the parent company to fund

development of question marksQuestion mark (high market growth/low relative market share):

question marks are new products which require significant investment they use more cash than they generate if successful can turn into stars and ultimately into cash cows

Dog (low market growth/low relative market share): dogs are businesses which have to be managed carefully dogs can be cash-neutral, but if making a loss need to be disposed of

quickly dogs are not able to generate the profits and growth expected by major

companies new owners (with different performance measures) might turn a dog into

a satisfactory return

Figure 15.2 BCG portfolio analysis – cash generated and cash used

External auditExternal environment includes all the factors over which the company has no control

Purpose of an external audit is to identify: potential opportunities that can be exploited by the

firm threats that might damage the business

External factors are applicable to all companies operating in the same competitor set

External influences can be classified: macro-environment micro-environment

Macro/micro-environmentsMacro-environment:

includes major regional, national and global trends influencing business and society

PESTE factors which influence the demand/supply in hospitality

macro-environment analysis evaluates current and future PESTE factors to enable the hospitality business to adapt its operations to changes in the needs and wants of customers

Micro-environment: includes external stakeholders and, most importantly,

customers, competitors and suppliers local or regional factors influence microenvironment

and impact upon hospitality business

SWOT analysis

Key SWOT data emerges from the situation analysis

Internal audit data reflect the strengths and weaknesses of marketing offers

External audit presents potential opportunities and threats facing hospitality business

The SWOT summarises key issues and helps to plan future objectives, strategies and tactics

SWOT Analysis

Strengths (internal)

Weaknesses (internal)

Opportunities (external)

Threats (external)

Objectives: ‘where do we want to go?’ Objectives are statements that translate the hospitality company’s

mission into easily understood targets regarding markets and products, sales, occupancy and the marketing mix

Objectives provide answers to the question ‘where do we want to go?’

Objective setting is an essential step in the marketing planning process

Companies that do not have objectives fail to provide managers and employees with a clear direction

Objectives should be Specific, Measurable, Achievable, Realistic and achieved within set Timetable (SMART)

SMART objectives provide managers with operational targets that measure performance using quantified metrics like money, percentages and numbers to be achieved by a given time period (month, year)

Gap analysis Gap analysis is an extension of ‘where are we now?’ and

‘where are we going?’

Company has historic sales data and SWOT suggest what will happen to sales in the future

Companies can find a ‘gap’ between where they want to be in terms of sales objectives and where a forecast based on the SWOT analysis tells them they will be

Gap analysis helps by computing the size of the gap and suggesting measures to bridge gap

Four alternative strategies for filling the ‘gap’ was developed into a matrix by Ansoff

Figure 15.3 Gap analysis

Ansoff MatrixMarket penetration strategy (existing markets/existing products)

Aim is to grow the business by increasing sales of current offer to current target markets

Market extension or development (new markets/existing products) Rolls out existing product to new markets Strategy can focus on growth within existing units, or expand

number of properties in the group

Product development (existing markets/new products) Strategy is to enhance product made to existing customers Hospitality operations are constantly looking for ways to increase

customer satisfaction by improving the product offer

Diversification (new markets/new products) Focus is on creating new products for new target customers Riskiest growth strategy because the company has no existing

customer or product knowledge

Figure 15.4 Ansoff or market/product mix

Marketing mix: ‘how do we get there?’ Marketing strategies and marketing tactics are marketing mix

decisions made by managers to achieve the agreed marketing objectives

Strategies and tactics should deliver sales from the targeted customers (target market segments) against the identified competitors (market positioning)

Two different approaches to construct the marketing mix part of a marketing plan:

Each element of the marketing mix in unit discussed: product strategy, price strategy, distribution strategy, the

marketing communications strategyMarketing mix for functional areas is considered: the marketing mix for the accommodation, the marketing mix

for the restaurant operations, the marketing mix for the conference

Budgeting Companies need to create a budget for the implementation of

their strategic and tactical marketing plans

Budgets include two classes of data: forecast revenues and costs

Costs attributable to marketing function are:

market research expenses distribution (commissions to intermediaries) marketing communication activities sales team (salaries, travel costs, support materials and

training) customer database management

Controls: ‘how do we know we are getting there?’

Effective marketing planning monitors and control the plan’s implementation

Key concerns are no unacceptable variance between plan’s revenue targets and anticipated sales

Five stages in control process:

set SMART objectives establish reporting process to inform progress against targets monitor performance identify significant variations from target take corrective action

Control measures include financial performance:

sales, achieved room rate, occupancy and RevPAR; customer mix ratios changes in market share changes in brand awareness and brand image number of hits on the website, number of bookings (the conversion ratio

from enquiries to bookings)

Contingency planning Contingency planning recognizes that key assumptions may be

incorrect Contingency plans are formulated on ‘what if?’ scenarios

what would happen if a serious environmental incident affected our business?

Only major risks are considered in contingency planning Contingency planning linked to crisis management and more

important Marketing plans should include budget items for contingencies

provides funds to take advantage of an unforeseen opportunity

responds to a downturn in demand by increasing marketing activity

Figure 15.5 Summary of marketing plan

Evaluation: ‘how do we know we have arrived?’

After conclusion of planning period, event or campaign, marketing team needs to evaluate results including:

comparison of actual performance with the SMART objectives across all the areas of the business

commentary explaining the reasons for variance provides useful information for the next marketing plan

Companies repeat successfully tried-and-tested tactics of previous years and aim to learn from less effective activities

Marketing is a continuous learning activity: cycle of forward-planning for next campaign implementing the current marketing action plan evaluating recent activity is carried out simultaneously

Conclusion

Marketing planning provides hospitality companies with a structured approach to planning for the future

Future is uncertain, environmental trends can be identified and evaluated

Marketing planning improves the chances of survival and success

References and further reading

Chan, B. (2003). ‘Sharing the experience’. Hospitality Magazine (HCIMA), pp. 18–19.

McDonald, M. (1999). Marketing Plans. Butterworth-Heineman.

McDonald, M. (2008). Malcolm McDonald on Marketing Planning: Understanding Marketing Plans and Strategy Marketing Plans. Kogan Page.