Basic Marketing: A Global Managerial Approach

Perreault−McCarthy: Basic

Marketing: A

Global−Managerial

Approach, 14/e

21. Developing Innovative
    Marketing Plans

Text © The McGraw−Hill

Companies, 2002

Once a manager has narrowed down to a few reasonable marketing mixes and

the relevant forecasts, comparing the sales, costs, and profitability of the different

alternatives helps in selecting the marketing mix the firm will implement.

Estimating the costs of the marketing activities for a strategy may be easy or hard

depending on the situation. Sometimes the accounting department can help with

information about what average costs for similar activities have been in the past.

Or sometimes estimates of competitors’ costs—perhaps pulled out of annual reports

or investor information posted on the Internet—can provide some guidance. How-

ever, in general the best approach for estimating costs is to use the task method.

We recommended this approach in Chapter 14 when we focused on promotion costs

and budgets. However, the same ideas apply to any area of marketing activity. The

estimated cost and budget for each activity is based on the job to be done—perhaps

620 Chapter 21

market potential and sales for the coming years.Then they try to work out a

consensus.

The main advantage of the jury approach is that it can be done quickly and eas-

ily. On the other hand, the results may not be very good. There may be too much

extending of the past. Some of the executives may have little contact with outside

market influences. But their estimates could point to major shifts in customer

demand or competition.

Using salespeople’s estimates to forecast is like the jury approach. But salespeo-

ple are more likely than home office managers to be familiar with customer reactions

and what competitors are doing. Their estimates are especially useful in some busi-

ness markets where the few customers may be well known to the salespeople. But

this approach may be useful in any type of market.

However, managers who use estimates from salespeople should be aware of the

limitations. For example, new salespeople may not know much about their markets.

Even experienced salespeople may not be aware of possible changes in the economic

climate or the firm’s other environments. And if salespeople think the manager is

going to use the estimates to set sales quotas, the estimates may be low!

Special surveys of final buyers, retailers, and/or wholesalers can show what’s hap-

pening in different market segments. Some firms use panels of stores—or final

consumers—to keep track of buying behavior and to decide when just extending

past behavior isn’t enough.

Surveys are sometimes combined with market tests when the company wants to

estimate customers’ reactions to possible changes in its marketing mix. A market

test might show that a product increased its share of the market by 10 percent when

its price was dropped 1 cent below competition. But this extra business might be

quickly lost if the price were increased 1 cent above competition. Such market

experiments help the marketing manager make good estimates of future sales when

one or more of the four Ps is changed.

Forecasting can help a marketing manager estimate the size of possible market

opportunities. But the accuracy of any sales forecast depends on whether the firm

selects and implements a marketing mix that turns these opportunities into sales

and profits.^6

Estimates from
salespeople can
help too

Surveys, panels, and
market tests

Accuracy depends on
the marketing mix

Analysis of Costs and Sales Can Guide Planning

Estimate the cost of
each activity