Planning

From Wikipedia, the free encyclopedia

For planning in AI see computer planning

Planning is the (psychological) process of thinking about the activities required to create a desired future on some scale. This thought process is essential to the creation and refinement of a plan, or integration of it with other plans. The term is also used to describe the formal procedures used in such an endeavor, such as the creation of documents, diagrams, or meetings to discuss the important issues to be addressed, the objectives to be met, and the strategy to be followed. Beyond this, planning has a different meaning depending on the political or economic context in which it is used.

In public policy

Planning refers to the practice and profession associated with land use planning, urban planning or spatial planning. In many countries, the operation of town and country planning system is often referred to as 'planning' and the professionals which operate the system are known as 'planners'.It is a process which is decided in advance what is to be done in the coming future.

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:

Ambiguous Goals [more actors and groups of actors are involved]
Lack of Agreement in Means-End Relationships [even where there is consensus on the goal there may be disagreement on how to get there]
Environmental Turbulence [non-profit organizations seem to be exposed more to turbulence than commercial ones]
Unmeasurable Outputs [unfortunately, by definition, non-profit organizations do not have the classically convenient simplicity of `bottom-line profit']
The Effects of Management Intervention are Unknown [the 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:

Surplus Maximization [equivalent to profit maximization]
Revenue Maximization [as for profit-making organizations]
Usage Maximization [maximizing the numbers of users and their usage]
Usage Targeting [matching the capacity available]
Full Cost Recovery [breaking even]
Partial Cost Recovery [minimizing the subsidy]
Budget Maximization [maximizing what is offered]
Producer Satisfaction Maximization [satisfying the wants of staff]

In organizations

Planning is also a management function, concerned with defining goals for future organizational performance and deciding on the tasks and resources to be used in order to attain those goals. To meet the goals, managers will invest significant resources for training and incentives to motivate employees.

Planning is the process of setting objectives and determining how to accomplish them. It is, simply, thinking before doing; of setting a goal and moving toward it.

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 action plan for a part of one marketing programme. It is also an iterative 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.

Forecasting

This can be a very complex topic but can, in general, be roughly divided into two parts;

SHORT-TERM FORECASTING

This is the type of forecasting you will recognise. It is normally based upon a projection of historical trends, usually focused on sales volumes. There are many sophisticated techniques, increasingly using large amounts of computing power, but in essence all of these try to separate out the four main components:

Long term trends probably represent the most important information you are trying to extract from the mass of data before you.
Medium term cycles are supposed to result from regular economic ups and downs (from boom to bust) which used to be encapsulated in a 5 year 'business cycle' which, unfortunately, became unpredictable in the 1980s. The much quoted 'Kondratieff Cycles' are much longer, if they exist at all, being of the order of 25 - 50 years; and hence do not normally enter into shorter term forecasts.
Seasonal is the pattern within a single year, a pattern which most suppliers who are affected by it know well.
Random fluctuations, which do not fit regular patterns, afflict all products and services, and make computer analysis a very difficult proposition.

The end result of all these patterns superimposed may appear very confusing indeed. Despite all the sophistication on offer, therefore, by far the best advice is to keep it as simple as possible. The human eye is much better at resolving the complications shown above than the most powerful computer. Thus, the best approach to forecasting (and certainly the best check on any more sophisticated technique) is 'eyeballing' the sales charts! With some practise you should be able to sort out the main features of what is happening - and that is better than most computer models achieve.

The evidence is that the sophistication adds little or nothing to the accuracy (though it does to the image of the forecasters, and the prices they charge). Worst of all, such unnecessary complexity hinders your understanding of what is going on under the covers of the computer (and hides the fact that most forecasts are really based on human judgement). In any case, even if historical trends are accurately analysed, there is no guarantee that the future will be the same as the past. It is much better that you surface all the assumptions, and make your own judgements in full knowledge of what is involved.

Two very simple techniques to use (if nothing else but as a check on the forecasts others are trying to sell to you);

EYEBALLING - the technique I mentioned above is the first, and best, method. It merely requires you to plot historical results graphically; and then look for the patterns. Trust your own judgement - until you are proved wrong.

EXPONENTIAL SMOOTHING - this is the mathematical technique which reportedly gives the best results; probably because it is so simple, and consequently easily understood. Indeed, it is a very impressive title for a simple, but useful, mathematical technique; which can quite easily be handled manually. It just allows greater weight to be given to recent periods. Instead of, for example, the average trend over the whole of the last year being calculated, the sales data for each of the months is given a weighting, depending on how recent that month was. It simply takes the previous forecast, and adds on the latest 'actual' sales figure; except that it does this in a fixed proportion, which is chosen to reflect the weighting to be given to the latest period. The general form is; Ft+1 = Ft + aEt where Ft+1 is the new forecast you are calculating, Ft is the previous one and Et is the deviation (or 'error') of the actual performance recorded against that previous period forecast; and 'a' is the weighting to be given to the most recent events. Exponential smoothing will not, in this simple form, allow for seasonality; though more sophisticated (but less easily understood) versions can do this.

LONG-TERM FORECASTING

This tends to be qualitative (as compared with the quantitative, numeric, focus of short term forecasts). It is even more dependent on judgement; and most of the more complicated approaches to it (such as Delphi, or Jury methods) aim to reduce the risks implicit in the judgement by spreading the process over panels of experts. It does not, in the final analysis, absolve the manager from backing his or her own judgement (which is probably better informed, in terms of the specific situation, than that of the 'experts').

Of all the techniques the most useful involves developing complementary scenarios, which allow for the uncertainties involved; as well as expanding the viewpoint of all the managers involved in the process. Unfortunately, in the form most often described it can also be the most complex and sophisticated of these techniques - and in this form perhaps only the very large corporate planning team at Shell have used it really effectively. A much simplified approach, based on the version which Shell recommend for their line managers who are not part of their corporate planning group, is more practical for most organisations. In this simplified version of the form originally described by Shell[1] the four steps to this process are:

Identify the important variables
Brainstorm to find the possible outcomes
Link these together in a series of alternative scenarios
Refine these scenarios

Identify the important variables - what (in the whole of the external environment, not just the marketing environment) are the most important factors which will determine the future of the organisation.
Brainstorm to find the possible outcomes - work through the different outcomes which different alternatives for these variables may lead to.
Link these together in a series of alternative scenarios - start to build six or seven scenarios ('stories' about the future of the organisation, or more importantly its market) which are able to contain these different alternatives.
Refine these scenarios - then work on the scenarios until they are condensed to two or three meaningful alternative (but complementary) descriptions of the future.

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.

Thus, the definition of IBM's `corporate mission' in the 1940s might well have been: `We are in the business of handling accounting information [customer need] for the larger US organizations [customer group] by means of punched cards [technology].' Fortunately, as the name itself (International Business Machines) indicates, IBM already had a wider perspective (and its corporate mission was virtually defined by its name).

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'. Theodore Levitt said: "Nothing drives progress like the imagination. The idea precedes the deed."

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 by the charismatic Watson dynasty.

Henry Mintzberg explained: "... in some cases, in addition to the mission there is the `sense of mission', that is, a feeling that the group has banded together to create something new and exciting. This is common in new organizations".

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 leaders. But the vision must be relevant. The message for the marketer is that, to be most effective, the marketing strategies must be converted into a powerful long-term vision; if such a vision does not already exist.

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?

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 `facts book' 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 the input 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'. 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".

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 are at 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.

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:

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 drinking and driving, 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 recognised by the organisation, is that of unrealised 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 organisation. This may not necessarily be recognised, in its totality, by the organisation - 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 organisation 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 recognised is that emergent strategies are the most powerful of all. They must, by definition, be dierctly 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 capitalising on such emergent strategies. The first of these, favoured 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 favoured 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 competitive advantage in handling such emergent strategies.

Marketing strategies

There are numerous definitions of what strategy is, but again James Quinn again 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"

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 we have 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 80:20 Rule 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, every exception to it (throughout the year) must be questioned; and the lessons learned, to be incorporated in the next year's plan.

References

K. J. Blois, Managing for non-profit organizations, 'The Marketing Book', ed. M. J. Baker (Heinemann, 1987)

P. Kotler and A. R. Andreasen, 'Strategic Marketing for Nonprofit Organizations' (Prentice-Hall, 1987)

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)

D. Abell, 'Defining the Business: The Starting Point of Strategic Planning' (Prentice-Hall, 1980)

T. J. Peters and R. H. Waterman, 'In Search of Excellence' (Harper & Row, 1982)

T. Levitt, 'The Marketing Imagination' (Free Press, 1986)

H. Mintzberg, 'Power in and around Organizations'(Prentice-Hall, 1983)

P. Kotler, 'Marketing Management' (Prentice-Hall, 3rd edn, 1976)

J. B. Quinn, 'Strategies for Change: Logical Incrementalism' (Richard D. Irwin, 1980)