Dr. Philip Kotler Answers Your Questions on Marketing

Questions:

1. Which megatrends do we have to consider for the future?
2. In your books, you have pointed out that globalization, hyper-competition and the Internet reshape markets and businesses. What effect are these dynamics having on marketing?
3. What is Marketing?
4. What would you consider among the chief misconceptions about effective marketing that are still operating in today’s companies. Who isn't "getting" it?
5. When did Marketing first appear?
6. What is the mission of marketing?
7. You say that marketing must play the lead role in shaping business strategy. Do you think that business executives are fully aware of the role that marketing can play in helping the company succeed?
8. You have said that if a company’s marketing department can’t propose any new opportunities, they should be fired. But are there many good opportunities still left?
9. What significant business opportunities would you identify in the evolving economy?

Answers:

1. Which megatrends do we have to consider for the future?

The economic landscape has been fundamentally altered by technology and globalization. Companies anywhere can now compete anywhere, thanks to the Internet and more free trade.

The major economic force is hyper-competition, namely companies are able to produce more goods than can be sold, putting a lot of pressure on price. This also drives companies to build in more differentiation. However, a lot of the differentiation is psychological, not real. Even then, a company’s current advantage doesn’t last very long in an economy where any advantage can be copied rapidly.

Companies must pay attention to the fact that customers are getting more educated and have better tools such as the Internet at their disposal to buy with more discrimination. Power has been passing from the manufacturer to the distributor, and now is passing to the customer. The customer is King.

2. In your books, you have pointed out that globalization, hyper-competition and the Internet reshape markets and businesses. What effect are these dynamics having on marketing?

All three forces act to increase downward pressure on prices. Globalization means that companies will move their production to cheaper sites and bring products into a country at prices lower than those charged by the domestic sellers. Hyper-competition means that there are more suppliers competing for the same customer, leading to price cuts. And the Internet means that people can more quickly compare prices and move to the lowest cost offer. The marketing challenge, then, is to find ways to maintain prices and profitability in the face of these macro-trends. No country’s industry is going to hold on to its customers if it can’t continue to lead in offering the most value. And the answer has to be: better targeting, differentiation and branding.

At the same time, various world regions are becoming more integrated and more protective. The members of a region are seeking preferential terms from the other members of the region. But artificial trade preferences cannot last long against a substantial deterioration of value.

3. What is Marketing?

Marketing is the science and art of exploring, creating, and delivering value to satisfy the needs of a target market at a profit. Marketing identifies unfulfilled needs and desires. It defines, measures and quantifies the size of the identified market and the profit potential. It pinpoints which segments the company is capable of serving best and it designs and promotes the appropriate products and services.

Marketing is often performed by a department within the organization. This is both good and bad. It’s good because it unites a group of trained people who focus on the marketing task. It’s bad because marketing activities should not be carried out in a single department but they should be manifest in all the activities of the organization.

In my 11th edition of Marketing Management, I describe the most important concepts of marketing in the first chapter. They are: segmentation, targeting, positioning, needs, wants, demand, offerings, brands, value and satisfaction, exchange, transactions, relationships and networks, marketing channels, supply chain, competition, the marketing environment, and marketing programs. These terms make up the working vocabulary of the marketing professional.

Marketing’s key processes are: (1) opportunity identification, (2) new product development, (3) customer attraction, (4) customer retention and loyalty building, and (5) order fulfillment. A company that handles all of these processes well will normally enjoy success. But when a company fails at any one of these processes, it will not survive.

4. What would you consider among the chief misconceptions about effective marketing that are still operating in today’s companies. Who isn't "getting" it?

Marketing is a terribly misunderstood subject in business circles and in the public’s mind. Companies think that marketing exists to support manufacturing, to get rid of the company’s products. The truth is the reverse, that manufacturing exists to support marketing. The company can always outsource its manufacturing. What makes a company is its marketing offerings and ideas. Manufacturing, purchasing, R&D, finance and the other company functions exist to support the company’s work in the customer marketplace.

Marketing is too often confused with selling. Selling is only the tip of the marketing iceberg. What is unseen is the extensive market investigation, the research and development of appropriate products, the challenge of pricing them right, of opening up distribution, and of letting the market know about the product. Thus, Marketing is a far more comprehensive process than selling.

Marketing and selling are almost opposites. Hard sell marketing is a contradiction. Long ago I said: “Marketing is not the art of finding clever ways to dispose of what you make. Marketing is the art of creating genuine customer value. It is the art of helping your customers become better off. The marketer's watchwords are quality, service, and value.”

Selling starts only when you have a product. Marketing starts before there is a product. Marketing is the homework the company does to figure out what people need and what the company should make. Marketing determines how to launch, price, distribute and promote the product/service offering in the marketplace. Marketing then monitors the results and improves the offering over time. Marketing also decides when to end the offering.

All said, marketing is not a short-term selling effort but a long-term investment effort. When marketing is done well, it occurs before the company makes any product or enters any market; and it continues long after the sale.

5. When did marketing first appear?

Marketing started with the first human beings. Using the first Bible story as an example (but this was not the beginning of human beings), we see Eve convincing Adam to eat the forbidden apple. But Eve was not the first marketer. It was the snake that convinced her to market to Adam.

Marketing as a topic appeared in the United States in the first part of the 20th century in the teaching of courses having to do with distribution, particularly wholesaling and retailing. Economists, in their passion for pure theory, had neglected the institutions that help an economy function. Demand and supply curves only showed where price may settle but do not explain the chain of prices all the way from the manufacturer through the wholesalers through the retailers. So early marketers filled in the intellectual gaps left by economists. Nevertheless, economics is the mother science of marketing.

Marketing is more of a craft and profession than an art form. The American Marketing Association and the British Chartered Institute of Marketing are independently working on professional credentials for professional marketing. They believe that tests can be constructed that can distinguish between qualified marketers and phony marketers.

At the same time, many people will originate brilliant marketing ideas who are not trained marketers. Ingvar Kamprad was not a marketer and yet his IKEA company is phenomenally successful in bringing good quality, low-cost furniture to the masses. Creativity is a big part of marketing success and is not limited to marketers.

But science is also important to marketing. Marketers produce interesting findings through marketing research, market modeling, and predictive analytics. Marketers are using marketing models to make decisions and guide their investments. They are developing marketing metrics to indicate the impact of their activities on sales and profits.

I would not say that marketing is more of an art, a craft or a science but rather that it has all these elements operating.

6. What is the mission of marketing?

At least three different answers have been given to this question. The earliest answer was that the mission of marketing is to sell any and all of the company’s products to anyone and everyone. A second, more sophisticated answer, is that the mission of marketing is to create products that satisfy the unmet needs of target markets. A third, more philosophical answer, is that the mission of marketing is to raise the material standard of living throughout the world and the quality of life.

Marketing’s role is to sense the unfulfilled needs of people and create new and attractive solutions. The modern kitchen and its equipment provide a fine example of liberating women from tedious housework so that they have time to develop their higher capacities.

7. You say that marketing must play the lead role in shaping business strategy. Do you think that business executives are fully aware of the role that marketing can play in helping the company succeed?

CEOs tend to see marketing as a department that comes into play after the product has been made and the remaining job is to sell it. We argue instead that marketing must be seen as setting the strategic direction for the firm. Peter Drucker stated it well over thirty years ago: “A company has only two basic functions: innovation and marketing.”

8. You have said that if a company’s marketing department can’t propose any new opportunities, they should be fired. But are there many good opportunities still left?

Granted that the absolute number of opportunities in an economy will vary with the business cycle and the technology cycle. Opportunities will be scarcer during recessions and when new technologies have not yet emerged.

But there are always opportunities! Just look at the new products that continue to appear in catalogs such as Sharper Image or Innovation or Fascination. Any company with a product or service should be able to think of new ways to modify it, combine it, offer different sizes, or add new features or services.

Not only can an offering be reshaped for different markets but the offering can also be seen in a new context.

I published Lateral Marketing (co-author Fernando Trias De Bes) which offers a creativity approach that differs from using vertical marketing (i.e., segmentation) to finding new ideas. Vertical marketing works within a given market; lateral marketing instead visualizes the product in a new context. Many examples can be cited. Today we can buy food at gas stations; we can do our banking in a supermarket; we can get access to a computer at cybercafes; we can take pictures with our cell phone; we can chew medical gum to ingest certain medicines in our body; we can eat cereal in the form of a candy bar. I can’t believe there aren’t opportunities. I can only believe that some marketers lack the ability to see opportunities. Marketing doesn’t have to fail during a recession, only marketers fail who lack an imagination.

9. What significant business opportunities would you identify in the evolving economy?

Here is my list of significant business opportunities:

• Biotech (e.g., rational drug design, biometric measurement for security)
• Mobile phones (e.g., micropayments through the phone, wireless devices)
• Security (corporate and home security)
• Niche businesses (e.g., a bank for Latinos)
• Outsourcing
• Storage systems
• Automation (e.g., highway passes through toll gates)
• Health care and medical devices
• Robots

With any perceived opportunity, ask the following questions:

1. Is there a substantial market?
2. What is the competitive landscape?
3. Can you develop a profitable business model?
4. Can you scale up quickly?

Philip Kotler Motto

"Marketing is not the art of finding clever ways to dispose of what you make. It is the art of creating genuine customer value."

-Philip Kotler

Secrets of Subaru's new diesel engine

from : Julian Rendell

Every car company faces environmental pressure, but not many have responded with the splendidly single-minded determination of Subaru.

Because when the new Impreza is unveiled at Frankfurt’s motor show in September, its brand-spanking, flat-four diesel engine will be a key feature, yet Subaru expects to make not a penny of profit from this much-needed new technology. Hard to believe, I know, but a senior executive at Subaru’s UK importer confided this fascinating snippet, apparently repeating what an exec in Japan said.

Maybe that comment was in jest, but with diesels taking about half of the European market and, in some countries and market segments, a much bigger proportion, it poses questions for Subaru’s long-term well-being.

Of course every car enthusiast can only applaud Subaru’s determination to go-it alone with the flat-four diesel, whose unique layout means that it can’t be sold or shared with any other car-maker.

Reputedly the design has been in development for 25 years, some of that time featuring the help of Toyota, and we know a few details, like the clever packaging of the intercooler below the engine that means it won’t force Subaru to spoil the bonnet line of the Impreza with a 1970s-era air intake. It also sits lower in the engine bay than today’s Impreza, which bodes well for road-holding, handling and turn-in.

Of course Subaru’s recent divorce from GM has helped force its hand into going it alone with the flat-four diesel, a move that’s also pushed Subaru into being a one-platform car-company.

Effectively the new Impreza is a short-wheelbase Legacy/Tribeca which means the introduction of a multi-link rear axle where previously there were struts. In that regard the Impreza matches up to Europe’s best, the Focus and Golf.

With global production of around 600,000 cars a year — which puts Subaru in the lower-middle ranking of the world’s car-makers — it can’t afford the diesel investment to drag it down. Saab, Porsche and Jag are 100k cars-a-year makers, hence their cost-volume conundrums, while the bulk of other established car-makers measure volume in millions.

The Impreza will hopefully address this shortfall. The new model is designed as a hatchback to broaden appeal and lift sales in Europe. In Japan, where hatchbacks sell in increasingly large numbers, it ought to do well too. Only for the US will there be a four-door sedan.

As if to reinforce that message, Subaru’s launch models at Frankfurt will have small capacity non-turbo engines – cooking models tasked with competing with the Focus, Golf, Megane et al. Not until Tokyo in October will the fire-breathing WRX STi models take a bow.

Let’s hope that the Impreza petrol-engined models get off to a good start at both these launches, because with all those diesel-engined models losing money for Subaru, profits have got to come from somewhere.

Engineering

Most simply, the art of directing the great sources of power in nature for the use and the convenience of people. In its modern form engineering involves people, money, materials, machines, and energy. It is differentiated from science because it is primarily concerned with how to direct to useful and economical ends the natural phenomena which scientists discover and formulate into acceptable theories. Engineering therefore requires above all the creative imagination to innovate useful applications of natural phenomena. It seeks newer, cheaper, better means of using natural sources of energy and materials.

The typical modern engineer goes through several phases of career activity. Formal education must be broad and deep in the sciences and humanities. Then comes an increasing degree of specialization in the intricacies of a particular discipline, also involving continued postscholastic education. Normal promotion thus brings interdisciplinary activity as the engineer supervises a variety of specialists. Finally, the engineer enters into the management function, weaving people, money, materials, machines, and energy sources into completed processes for the use of society.

Making Time for Marketing

"I don't have time to market." It's a common complaint from self-employed professionals. When you are the only one who can serve the clients, manage the business, and perform all the sales and marketing functions, time becomes the most precious commodity you have. How can you find time for marketing with so many other important priorities?

There are many time management techniques at your disposal, of course. You can defer tasks or delegate them, chunk down projects to smaller steps, and set aside time on your calendar for making calls, writing letters, or updating marketing materials. Perhaps you have already tried all those methods and discovered that time is still scarce.

Maybe the real answer is not to find more time for marketing, but to MAKE time. Every day, you take part in many time-consuming activities that don't include marketing. What if you could integrate marketing with all those things you are already doing? Here are some examples of how that can work:

1. Attending workshops, business mixers, and cultural events.
Whenever you plan to attend an event like this, consider inviting a business contact to join you. Just extending the invitation will contribute to building a stronger relationship between you. If your contact decides to attend, you can often get to know each other better in a more relaxed way than meeting one-to-one.

2. Having lunch or coffee with a prospect or colleague.
If you are already planning to take time meeting with someone, add a third or fourth person to the party. Those invited will usually appreciate the opportunity to make new contacts themselves, and you may find conversation flows more easily when there is a group.

3. Traveling to another city.
Whether you are traveling for business or pleasure, arrange to meet for lunch or dinner with a client or colleague. On a business trip, this is usually much more enjoyable than dining alone. As a tourist, a meal you would be eating anyway takes no time out of your vacation schedule, plus you'll often get local tips about where to go and what to do.

4. Taking a walk, visiting the gym, and other forms of exercise.
Meetings with business associates don't have to take place in the office or a restaurant. Invite someone to join you for a walk in the park, run around the track, or a game of tennis. You don't have to learn to play golf in order to get exercise and do business at the same time.

5. Reading an article.
Any time you read an interesting article in the newspaper, a magazine, or online, think of three people you could send it to. Writing a short "thought-you-would-be-interested" note and forwarding the item will take only a moment, but can make a big impression on the recipient.

6. Shopping, dining, or running errands.
Every time you leave your home or office, you meet new people. They are behind the counter at the office supply store, in line at the coffee shop, sitting at the next table, or shopping in the same aisle. Whenever you find yourself chatting with strangers, remember to introduce yourself by name and occupation. You'll be surprised to discover how often this will lead to a connection that can result in business.

7. Attending social events.
The best business relationships often begin casually in social environments. Keep your business cards in your pocket when you attend a wedding, housewarming, holiday party, or your child's soccer game. After you ask, "How do you know our hosts?" or "Which child is yours?" make your next question, "What do you do?"

8. Relaxing.
You may have a long list of marketing projects that will take time but not your full attention. Consider doubling up these mundane tasks with a fun activity or some pleasant company. Enter business cards into your contact database on your laptop at the beach. Make phone calls from the hot tub or a park bench. Review your prospect list while watching old movies or listening to music. Ask your kids to help you stuff and address envelopes. Take your project to a friend's house so the two of you can work together on marketing.

As you can see, there are many ways to include marketing activities in your busy life. So instead of wishing you had more time for marketing, why not make marketing a part of the time you are already spending?

What's Your Marketing Attitude?

Entrepreneurs pay a lot of attention to the mechanics of marketing. They take workshops, read books, and hire consultants to find out how to do the best job they possibly can. With my own clients, I often discover that their knowledge of marketing techniques is quite good already. What they might lack is the right kind of marketing attitude.

Do any of the attitudes described below sound familiar? If so, you may be sabotaging your own marketing efforts. Read on for some possible solutions.

1. "I shouldn't have to market." If you are good enough at what you do, you tell yourself, clients should just come to you. Marketing is for products, not professionals. You have years of training and experience in your specialty, why should you have to spend your precious time on marketing?

   This perception is extremely common among consultants and professionals, although many won't admit it. The fact is that successful marketing is a necessary part of business ownership. If you could get all the paying work you wanted without having to market, why wouldn't everyone be self-employed?

   If you perceive marketing as a dirty business, try thinking of it as the diapers you need to change in order to have the joys of being a parent. But instead of focusing on what you dislike, tie your marketing chores to your vision of a successful business.

   Visualize checks arriving in the mail when it's time to make a cold call, or picture a signed contract when preparing for a presentation. Post visual reminders (e.g. photos or clippings) at your desk of the reasons you became self-employed in the first place. Parents don't remember all the diapers when they're looking at the baby photos.

2. 2. "I don't have time for marketing." There are only two situations where this can really be true: you're too busy doing the client work you already have, or you have other important responsibilities (e.g. an outside job or young children) taking up your time.

   It's easy to believe that doing client work already contracted for is more important than marketing, especially when deadlines are tight. But if you always follow this policy, you will be locked into a feast or famine cycle, with no new clients waiting for you when the work is finished.

   Whether your responsibilities preventing you from marketing are within the business or outside it, you need to allocate a minimum amount of time each week, no matter what. Even two hours per week can make a significant difference, if you consistently use that time for marketing.

   Imagine that you have overslept, and are late for an appointment. You might skip breakfast, but would you leave the house without brushing your teeth? Of course not. If you are going to be successful in business, that's how automatic marketing needs to become for you.

3. "My marketing isn't working." It's true that there may be something wrong with your marketing. Perhaps your message is unclear or the tactics you're using are inappropriate for the audience. I find, though, that for the majority of business owners who say this, the real problem is not that their marketing isn't working but that they aren't working their marketing.

   Let's say your business needs two new clients a month, on average. If, in your experience, you must make a detailed presentation, proposal, or initial consultation to three potential clients for one to say yes, you will need to make six of these presentations per month.

   Now how many prospects do you need to have contact with for one to be interested in a presentation? Ten, maybe? That means you need to make contact with 60 prospects each month to land your two new clients. If you do this math for yourself, you may quickly find that the only thing wrong with your marketing is that there hasn't been enough of it.

How Much Should I Spend on Marketing?

If I categorized all of the questions that I would receive, I would have to say that the majority are concerning how much to budget and spend on marketing.

It's a tricky question. The important thing for new companies is testing marketing vehicles to see which performs and provides the best return on investment. Mature companies or businesses that have been in business for a considerable amount of time know which vehicles work for them; if they don't they are in trouble.

I typically recommend that companies invest 20% of their resources into marketing. This is 20% of your budget as well as your time. You continually reinvest 20% into marketing on an ongoing basis. As time goes on you may be able to decrease your time spent in marketing, but in return monetary resources may need to increase. The key is to find the vehicles that work best for your target market. Is it Internet, newspaper, audio commercials, or television commercials.

You will find that some people suggest as your business grows to decrease your amount in marketing. I firmly disagree with this tatic. You should always be marketing to new potential customers as well as marketing to the repeat consumer.

Review your marketing mix. There's no such thing as one specific activity but rather a cross-section of marketing strategies will bring the success you need. It's the small things that add up when put together. Determine what marketing works by asking your customers and disregard any marketing vehicles that are not working for you and reinvest in those that do.

Five Tips to Generate Word of Mouth Marketing

We all know that economic times are tough. I always suggest that businesses don't pull their marketing budget. Not all business listen, unfortunately.

That's why I want to share with you a few tips that will help you generate word of mouth marketing for your business.

Word-of-Mouth marketing is the most difficult to measure, but it's also the most cost effective, because it costs you nothing.

Your customers are the best vehicle for positive word-of-mouth marketing, but how can you get them to talk about you?

Ask them to try your product.

If you want consumers to talk about your product, ask them to try and then to tell others about it. This is an effective way to build excitement and genuine recommendations.

Find ways to make your customers feel like company insiders.

Involve them, ask their opinion and then listen. Make them feel like their feedback and opinion matters. Create a list that shares with them upcoming events, product or specials that are coming up.

Provide a forum for influences to have a conversation on behalf of your brand.

Give influencers a forum to share their opinion and feedback. This could be a company sponored cocktail party or as simply as an online forum for selected customers only.

Provide quality service and treat every customer with respect.

Give your consumer something good to talk about. Show them quality in service and treat every customer with respect. Do you think Starbucks became popular because of their $4.00 lattes? No they became popular because they made an effor to know their customers names and remember their favorite drinks. They provide quality and experience, that's why customers paid $4.00 for a latte. Unfortunately they've gotten a little lax on it lately, but in the beginning they had it down to a science. Perhaps if they were focus on it again they might see a brighter economic future in these tough times.

Stay in touch, provide them with specials that they want to talk about.

Put your consumers in the know. Inform them of specials, send them coupons and by all means stay in touch. This will not only increase their visits, but it will get them talking about you.

Is a Career in Marketing Right for You?

A career in marketing can take you in several different directions. Marketing in comprised of many facets and activities. You will find that there are many opportunities in marketing, but the common denominator of those opportunities is the sense of ownership over the product and/or service and the necessity to understand the customers needs and desires and then be able to translate those needs in the communication of your marketing strategy. That marketing communication can be done in several ways that is why a career in marketing opens several doors as a profession.

In the marketing profession your job will be to take a "generic" product and/or service and associate that product or service with a brand name. Marketing can be defined as being the intermediary function between product development and sales. Think of it as the storehouse for such things as advertising, public relations, media planning, sales strategy, and more. It's the marketing professionals job create, manage, and enhance brands. This ensures that consumers look beyond the price and function of a product or service when they are weighing consumption options. A key part of a career in marketing is to understand the needs, preferences, and constraints that define the target group of consumers or the market niche corresponding to the brand. This is done by market research.

The great thing about marketing is it is a function that is needed in every company in every industry, so career potential is unlimited. There are career tracks in marketing that you can follow. You can find many opportunities in marketing in the following categories:

• Market Research
• Brand Management
• Advertising
• Promotions
• Public Relations

Let's take a closer look into each of these categories and find the one that best fits your personality.

Word of Mouth vs. Viral Marketing: What's the Difference?

Word-of-mouth marketing or viral marketing? What's the difference?

Recently I shared with you a few tips on how to generate word-of-mouth marketing for your business. I received a few emails as well as comment post on the difference between word-of-mouth marketing and viral marketing, so I figured what better time to explore the differences in these two types of marketing.

Word-of-mouth marketing is when a business does something and their consumer tells five to ten friends. Word-of-mouth marketing has an echo affect. The initial sound is loud and then it fades into the background.

Viral marketing unlike word-of-mouth marketing has a compounding affect. A consumer tells five to ten people and then those five to ten people tell another five to ten people. The driving force behind most viral campaigns is the passion a consumer carries. It's like a virus that continuously infects more people and spreads without requiring anymore marketing effort.

While the two are similar as you can see they are not the same.

Word-of-mouth marketing is a key component to the growth of a small business. It's often word-of-mouth marketing that keeps small businesses running in the early days of operation when there is little to no marketing budget. The consumer shares their experience with your products or services and they share it with their family and friends. This increases your consumer base and increases your sales.

Viral marketing is more about reaching out and touching the passion point of your consumer, so that the passion drives the message and the message continues to reach the masses without assistance from you. You can orchestrate a viral campaign, but very seldom are viral campaigns that are orchestrated as successful as those that are just driven by the passion of a consumer. In order for it to reach a level of success your consumer must feel they have a personal stake and investment in the success of your campaign.

It's important to also realize that the success of a viral campaign depends on the vehicles use to transmit the message. There are companies that are more virally equipped than others. In order to create a strong viral link the message must be able to transport from television advertising, to radio and other extended means of broadcasting to the power of the Internet.

In conclusion the major different between word-of-mouth marketing and viral is that word-of-mouth is often driven by you the marketer or business owner and viral marketing driven by the passion of your consumers and it's success does not depend on you.

Quantifying Your Marketing Efforts

It's true we spend marketing dollars to display at trade shows, to attend events, to hold conferences, and to produce marketing material for campaigns. How do we know what we are getting in return? How can we quantify the results to make sure they are worth the revenue spent?

This may seem like an easy question, however it's one that I am asked often. I have seen companies that don't even quantify their marketing efforts. Let me just say that's a big mistake. While marketing can be in the most part trial and errors you can diminish errors by actually using calucations to see which campaigns are bringing in the most results for the money.

It's vital to develop a consistent plan and strategy that will help you project, measure and evaluate your marketing campaigns, without it you are simply going about marketing blindly. This is one of the most costly mistakes in business.

In each marketing campaign you must develop a plan and strategy that identify the following:

• Quantitive and Qualitative goals
• Campaign budget
• Fulfillment and response strategy
• Follow-up Strategy
• Tracking and testing criteria for your campaign

Depending on your objective most goals can be measured effectively using one of three methods. These methods include:

• Cost per sale
• Cost per qualified lead
• Cost per visitor

Once you decide which result you want to measure and you have the costs incurred for the event; calculating is actually fairly easy.

Cost per sale = Amount Spent for Event/Campaign / Number of sales = Cost per sale

Cost per Qualified Lead = Amount Spent for Event/Campaign / Number of Qualified Leads = Cost per qualified Lead

Cost per Visitor or Response = Amount Spent for Event/Campaign / Number of visitors or response = Cost per Visitor or Response

Using these formulas and having a developed plan for each campaign will give you the information you need to decide if in fact the campaign or event was effective for your business. If it was...Congratulations. If not, it's time to visit the efforts of the campaign and find out exactly why it didn't work and how you can better it the next time. Was it the event location, wrong targeted marketing? Perhaps your materials that you sent out didn't care an actionary message? There are several reasons why a campaign may not yield the desired the results, but future successes will come from determining what those reasons are.

Marketing Strategies

The American Marketing Association defines marketing as "the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives." Marketers use an assortment of strategies to guide how, when, and where product information is presented to consumers. Their goal is to persuade consumers to buy a particular brand or product.

Successful marketing strategies create a desire for a product. A marketer, therefore, needs to understand consumer likes and dislikes. In addition, marketers must know what information will convince consumers to buy their product, and whom consumers perceive as a credible source of information. Some marketing strategies use fictional characters, celebrities, or experts (such as doctors) to sell products, while other strategies use specific statements or "health claims" that state the benefits of using a particular product or eating a particular food.

Impact and Influence

Marketing strategies directly impact food purchasing and eating habits. For example, in the late 1970s scientists announced a possible link between eating a high-fiber diet and a reduced risk of cancer. However, consumers did not immediately increase their consumption of high-fiber cereals. But in 1984 advertisements claiming a relationship between high-fiber diets and protection against cancer appeared, and by 1987 approximately 2 million households had begun eating high-fiber cereal. Since then, other health claims, supported by scientific studies, have influenced consumers to decrease consumption of foods high in saturated fat and to increase consumption of fruits, vegetables, skim milk, poultry, and fish.

Of course, not all marketing campaigns are based on scientific studies, and not all health claims are truthful. In July 2000 a panel of experts from the U.S. Department of Agriculture supported complaints made by the Physicians Committee for Responsible Medicine that the "Got Milk" advertisements contained untruthful health claims that suggested that milk consumption improved sports performance, since these claims lacked scientific

Companies often use characters to appeal to young consumers. Ronald McDonald first appeared on T.V. in 1963, portrayed by Willard Scott. The clown is known worldwide, and according to McDonald's, is the most recognizable figure next to Santa Claus.

[Photograph by Tim Clary. AP/Wide World Photos. Reproduced by permission.]

support. In addition, the panel agreed with the physicians' claim that whole milk consumption may actually increase the risk of heart disease and prostate cancer, and recommended that this information be included in advertisements.

The tremendous spending power and influence of children on parental purchases has attracted marketers, and, as a result, marketing strategies aimed at children and adolescents have increased. Currently, about one-fourth of all television commercials are related to food, and approximately one-half of these are selling snacks and other foods low in nutritional value. Many of the commercials aimed at children and adolescents use catchy music, jingles, humor, and well-known characters to promote products. The impact of these strategies is illustrated by studies showing that when a majority of television commercials that children view are for high-sugar foods, they are more likely to choose unhealthful foods over nutritious alternatives, and vice versa.

Inappropriate Advertisements

Attempts to sell large quantities of products sometimes cause advertisers to make claims that are not entirely factual. For instance, an advertisement for a particular brand of bread claimed the bread had fewer calories per slice than its competitors. What the advertisement did not say was that the bread was sliced much thinner than other brands.

Deceptive advertising has also been employed to persuade women to change their infant feeding practices. Advertisers commonly urge mothers to use infant formula to supplement breast milk. Marketing strategies include

One strategy used by advertisers is to feature a celebrity in their advertisements or on their packaging. The implicit message is that the celebrity endorses the product, uses the product, and may even depend on the product for success.

[AP/Wide World Photos. Reproduced by permission.]

giving women trial packs or coupons for several months of free formula. Often, women are not aware that supplementing breast milk with formula will reduce or stop their milk supply. When the samples and coupons are no longer available, women may try to "stretch" the formula by mixing it with water, unaware that diluting the formula places their infant at risk for malnutrition. Many groups have objected to the use of marketing strategies that include free formula and coupons, and infant-formula manufacturing companies have been forced to modify their marketing practices.

Other marketing strategies involve labeling foods as "light," meaning that one serving contains about 50 percent less fat than the original version (or one-third fewer calories). For example, a serving of light ice cream contains 50 percent less fat than a serving of regular ice cream. As a result, consumers mistakenly believe that eating light food means eating healthful food. However, they fail to realize that a serving of the light version of a food such as ice cream can still contain more fat and sugar than is desirable.

Food labels with conflicting information often confront consumers. For example, labels claiming "no fat" do not necessarily mean zero grams of fat. Food labeling standards define low-fat foods as those containing less than 0.5 gram of fat per serving. Therefore, consuming several servings may mean consuming one or two grams of fat, and people are often unaware of what amount of a food constitutes a "serving." In addition, foods low in fat may be high in sugar, adding additional calories to one's daily caloric intake. Too often, consumers mistakenly translate a claim of "no fat" into one of "no calories."

Other examples of conflicting claims include labels advertising foods as "high in fiber," without specifically indicating the presence of high levels of salt, sugar, or other nutrients. Also, labels advertising dairy products as high in calcium, and thus offering protection from osteoporosis, are often missing information relating to the high fat content and its possible contribution to the risk of heart disease.

Consumers are also misled by food comparisons. For example, one fruit drink may be advertised as containing more vitamin C than another, when in reality neither of the drinks are a good source of the vitamin. In addition, labels on some fruit drinks claim that the product "contains real fruit juice" when, in reality, the fine print reveals that one serving contains "less than 10% fruit juice."

Recommendations for Responsible Food Marketing

Consumers rely on product advertisements and food labels for nutritional education. The American Association of Advertising Agencies states that responsible food marketing strategies should: (1) avoid vague, false, misleading, or exaggerated statements; (2) avoid incomplete or distorted interpretations of claims made by professional or scientific authorities; and (3) avoid unfair product comparisons. Advertisers must also consider the long-term consequences or potential for harm stemming from their claims. While these recommendations are important in developed countries, they become even more critical in international marketing campaigns.

It is also important for consumers to recognize their role in evaluating health claims and product comparisons. While advertisers are aware of the need for truth in advertising, sometimes their desire to sell products over-shadows an accurate disclosure of product attributes. Advertisers should bear in mind that inaccurate or vague health claims have the potential to cause economic hardship, illness, and even death. Lastly, marketing strategies used in developing nations should be subjected to the highest standards of truth in advertising.

MARKETING PLAN

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. Marketing plans cover between one and 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 action plan for a part of one marketing programme. It is also an interactive process, so that the draft output of each stage is checked to see what impact it has on the earlier stages - and is amended.

Marketing planning aims and objectives

Behind the corporate objectives, which in themselves offer the main context for the marketing plan, will lay 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].' 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'. 'In Search of Excellence' 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.

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:

1. Financial data --Facts for this section will come from management accounting, costing and finance sections.
2. Product data --From production, research and development.
3. Sales and distribution data - Sales, packaging, distribution sections.
4. Advertising, sales promotion, merchandising data - Information from these departments.
5. 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:

1. '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.
2. 'Review of the detailed marketing activity'. A study of the company's marketing mix; in terms of the 7 Ps - (see below)
3. '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.

• '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'.

• '7 Ps': Product, Place, Price and Promotion, Physical Environment, People, Process. The 7 Ps can sometimes divert attention from the customer, but the framework they offer can be very useful in building the action plans.

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.

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 7 Ps. Examples are:

Price- The amount of money needed to buy products

Product- The actual product

Promotion (advertising)- Getting the product known

Placement- Where the product is located

People- Represent the business

Physical environment- The ambience, mood, or tone of the environment

Process- How do people obtain your product

In principle, these strategies describe how the objectives will be achieved. The 7 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 7 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 7 Ps, the focus will vary, depending upon your organization's specific strategies. A product-oriented company will focus its plans for the 7 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.

Content of the marketing plan

A marketing plan for a small business typically includes Small Business Administration Description of competitors, including the level of demand for the product or service and the strengths and weaknesses of competitors

1. Description of the product or service, including special features
2. Marketing budget, including the advertising and promotional plan
3. Description of the business location, including advantages and disadvantages for marketing
4. Pricing strategy
5. Market Segmentation

Medium-sized and large organizations

The main contents of a marketing plan are:

1. Executive Summary
2. Situational Analysis
3. Opportunities / Issue Analysis - SWOT Analysis
4. Objectives
5. Strategy
6. Action Programme (the operational marketing plan itself for the period under review)
7. Financial Forecast
8. Controls

In detail, a complete marketing plan typically includes:

1. Title page
2. Executive Summary
3. Current Situation - Macroenvironment
• economy
• legal
• government
• technology
• ecological
• sociocultural
• supply chain
4. Current Situation - Market Analysis
• market definition
• market size
• market segmentation
• industry structure and strategic groupings
• Porter 5 forces analysis
• competition and market share
• competitors' strengths and weaknesses
• market trends
5. Current Situation - Consumer Analysis
• nature of the buying decision
• participants
• demographics
• psychographics
• buyer motivation and expectations
• loyalty segments
6. 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
7. Summary of Situation Analysis
• external threats
• external opportunities
• internal strengths
• internal weaknesses
• Critical success factors in the industry
• our sustainable competitive advantage
8. Marketing research
• information requirements
• research methodology
• research results
9. Marketing Strategy - Product
• product mix
• product strengths and weaknesses
• perceptual mapping
• product life cycle management and new product development
• Brand name, brand image, and brand equity
• the augmented product
• product portfolio analysis
• B.C.G. Analysis
• contribution margin analysis
• G.E. Multi Factoral analysis
• Quality Function Deployment
10. Marketing Strategy ^[5] - segmented marketing actions and market share objectives
• by product,
• by customer segment,
• by geographical market,
• by distribution channel.
11. Marketing Strategy - Price
• pricing objectives
• pricing method (eg.: cost plus, demand based, or competitor indexing)
• pricing strategy (eg.: skimming, or penetration)
• discounts and allowances
• price elasticity and customer sensitivity
• price zoning
• break even analysis at various prices
12. Marketing Strategy - promotion
• promotional goals
• promotional mix
• advertising reach, frequency, flights, theme, and media
• sales force requirements, techniques, and management
• sales promotion
• publicity and public relations
• electronic promotion (eg.: Web, or telephone)
• word of mouth marketing (buzz)
• viral marketing
13. Marketing Strategy - Distribution
• geographical coverage
• distribution channels
• physical distribution and logistics
• electronic distribution
14. Implementation
• personnel requirements
• assign responsibilities
• give incentives
• training on selling methods
• financial requirements
• management information systems requirements
• month-by-month agenda
• PERT or critical path analysis
• monitoring results and benchmarks
• adjustment mechanism
• contingencies (What if's)
15. Financial Summary
• assumptions
• pro-forma monthly income statement
• contribution margin analysis
• breakeven analysis
• Monte Carlo method
• ISI: Internet Strategic Intelligence
16. Scenarios
• Prediction of Future Scenarios
• Plan of Action for each Scenario
17. 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, against predetermined 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 terms of 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

Few organizations track market share though it is often an important metric. Though absolute sales might grow in an expanding market, a firm's share of the market can decrease which bodes ill for future sales when the market 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
• annual fluctuation rate of market share

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 contribution<>net profit
• gross profit<>return on investment
• net contribution<>profit 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 be obtained (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 for activities 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 in monitoring 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 the other 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.