Developing action plans

Actions necessary to deliver a strategy may be only partially managed by the marketing function. Marketing, however, cannot take responsibility for ensuring that all actions required by other parts of the company to deliver an agreed strategy are implemented and that other teams are measuring performance. The marketing team has to develop a convincing plan that clearly demonstrates to other areas of the company why actions are required, and the benefits that lead to achieving corporate goals, in order to gain cooperation. This is easy to say, but company structure, preoccupation with achieving short-term goals, conflicting priorities, variable levels of commitment from senior management, accounting conventions and so on are all examples of challenges that are likely to be faced in gaining the necessary cooperation from colleagues. For example, if required actions require collaboration with operations and logistics, then there will be the need to influence decisions across all these areas.





The marketing team may be responsible for assessing both the value required by customers and their value to the company, but the whole organization is involved in delivering, and sustaining, that value.



Actions might be linked to individual impact factors by segment or to a particular strategy; they might cover a need identified across several, or all, segments. For example, the need to answer a service call in six rings might be an appropriate strategy for all valued customer segments.





Identifying actions

Some actions are more obvious than others. For example, an FMCG company that regularly introduces new products to the market will have a defined process developed over time that identifies the key actions necessary across the organization.



Whatever the process that is used, it must help ensure that all necessary actions, and the dependencies between them, are identified. A tool developed at Cranfield School of Management to provide such a process is the Benefits Dependency Network BDN (Peppard, Ward and Daniel, 2007) shown in Figure 8.2. While this model was initially developed to identify appropriate IT solutions in order that business goals can be achieved, in a modified form it can be used to help identify the actions necessary to achieve marketing strategies, and the metrics necessary to track performance. The example shown in Figure 8.2 is based on an analysis conducted for a leading international packaging company as an input to its key account management strategy.



The process runs from right to left, starting with the strategy defined in the impact factor analysis. The position relative to the impact factor analysis is shown, as this is where the strategies are identified. The first step is to brainstorm all the possible benefits that might be derived from this strategy – for the organization, customers in the segment(s) and other stakeholders. This also provides a framework for developing any necessary business case

for supporting investment.









The next step is to identify all the actions that are critical to achieving success for the strategy, followed by identifying enabling actions – the other actions necessary to ensure that those critical to success can be implemented. The last step is to finalize the metrics necessary to track progress.



In this particular example, the strategy was to improve relationships and retention with key customers, based on an analysis of customer needs. The goal was to provide competitive advantage in the market. One of the benefits identified was that the proposed strategy would enable current and potential customers to have a clear understanding of all that the company might have to offer them – and provide this in a consistent way at all touch points. A further key benefit would be improved knowledge management about customers and their needs. Finally, it was felt that the business risks faced by the company would be reduced, owing to improved market knowledge and increased retention of existing customers.





Actions critical to success included a unified process for handling key accounts, compiling holistic data about customers and sales, new sales support literature, and developing a measurement process. A key investment would be in a new intranet system to be developed by IT to a specification developed by marketing plus input from other areas, such as sales. All of these actions would require significant support or collaboration with areas outside of marketing. A metrics process was also identified as a key action for marketing to track progress.





The key actions could be delivered only if a number of enabling actions were also put in place, such as appropriate training programmes (in association with human resources), support to enable the key account process to be embedded across the organization, internal marketing to sell the new strategy to employees, and a pilot to test the proposed intranet system (to be developed by IT).





The process used to apply the BDN process was initially a one-day workshop, including key people from outside marketing, followed up with a detailed plan refined through further discussion across the company.





As a result of using the BDN process, the company realized that the current system was inappropriate for meeting the key account goals. The process identified the need for a more user-friendly intranet-based product, which was subsequently developed and implemented. In addition, by using the BDN process, those responsible for the necessary key actions could be readily identified. Collaboration was enhanced by ensuring that all the key parts of the company were involved in the discussions. In the organization concerned, the key members of an implementation team were identified as needing to be:



● a sales director representing one of the main market sectors;

● an executive sponsor;

● an IT/data strategist;

● a member of the sales team;

● a project manager.

Organizations within the Cranfield Key Account Management Research Club (Mouncey, McDonald and Ryals, 2004) confirmed that the key benefits of using the BDN model were:

● economic – establishing whether, and where, the project will add value;

● political – obtaining funds, winning hearts and minds;

● change management – early identification of issues (eg feasibility, desirability, resources, ownership, organizational impact);

● control – establishing project measurement criteria (eg benefits, costs, resources, etc).





The BDN helped us work through the requirements needed to implement a new system that was more appropriate to our business than the previous one. Looking at the objectives first and working through the benefits and the requirements in detail was very beneficial. Looking at the graphical representation helped to visualize and work through some of the changes required.





Capturing actions, metrics and costs

Table 8.1 shows the template that can be used to capture all the marketing actions necessary to achieve each of the critical success factors identified in the impact analysis. This template captures for each action:

● who is responsible for that action within the marketing team;

● the metric(s) that will be used to track the impact of the action;

● how frequently the action needs to be measured;

● who will be responsible for undertaking the measurement;

● who will see the metric(s);

● the likely cost of each marketing action.

Table 8.2 shows a similar template for capturing the information about the other actions that will be necessary outside the marketing team. The example included is the action on IT to build the website as specified in the brief prepared by marketing shown in Table 8.1. The key issue here is to ensure that the template captures all the necessary actions required from other parts of the company and is therefore completed with input from all concerned.

Templates similar to Tables 8.1 and 8.2 will need to be completed for qualifying and productivity factors.





Analysing actions by strategy

The marketing and other strategies necessary for all appropriate qualifying, competitive advantage and productivity factors for the strategy. The example combines the factors analysis shown in Table 7.4 for enhancing the service provided by the call centre and the actions shown in Tables 8.1 and 8.2 for developing a website to help achieve an overall strategy, provide best-in-class customer service.













Developing the budget

By budget, we mean the allocation of resources. This is an input to marketing activity. We don’t mean the sales forecast, as this is an output metric. Unfortunately, the same term is often applied to both of these, when in fact they are radically different. In many organizations the annual round of budget planning starts with what was spent last year, therefore leading to a repetition of the same round of activity, which over time can become increasingly divorced from the real needs of the business. We would argue that this is not the best way to address the future needs of a business in today’s highly competitive markets – and this is not the way that is proposed within the Metrics model.



However, we also recognize that users of the model may have to apply it within the conventions used by their organizations. So, while the model does not absolutely require that budgets be structured differently, we advocate a structure that enables the resources necessary to achieve defined objectives to be identified, in other words the resources necessary for implementing the actions for each segment identified by applying the model, as described in the previous sections of this chapter.



The budget should therefore be structured according to the impact factors that the action is designed to address. They would be quantified by building up a picture of the action required to implement each strategy. This approach that we describe is very different from traditional practices. It begins the process of tracking the links between the use of resources and the effect they will produce in the marketplace. This is in effect a zero-based or activity-based approach where the resources needed to achieve a specific goal are identified as the budget, rather than starting from the expenditure in the previous cycle. Budget categories are then defined by groups of actions, ideally according to the impact factor they are designed to address. Categories need to be reassessed annually: some will continue from one year to the next and others will not. This alone will be valuable in helping to break away from established practices unrelated to achieving precise goals.



If an activity-based approach is introduced, the agenda for the company, and the likely resources that need to be deployed to achieve goals, will become much clearer, both in terms of what should be the result if strategy is actioned, and also in terms of what will not be achieved if resources are not allocated to facilitate defined strategy. It will also make it easier to link the marketing budget with the budgets of other functions, which should also show resources allocated to those of their actions that are directed at specific impact factors. In addition, taking this ‘bottom-up’ approach to defining resource needs and assembling budgets, linked to achieving specific goals, should enable the marketing team to engage more effectively with other areas of the company in gaining cooperation.





Marketing, seen as an integrated activity, incurs costs of five types:

1 external marketing spend, mainly on marketing communications;



2 internal marketing department costs;

3 technology, such as CRM systems, customer databases and websites – this is a growing area of resource need and will often incur a mixture of internal and external costs;

4 leverage of internal resources of other departments, for example in developing and implementing IT projects;

5 a requirement for other departments to spend externally – again, IT projects may require investment in new technology via the IT function.



However, only the first two (and mostly the external marketing spend) are normally recognized as marketing costs, for the following reasons:



● External spend on marketing campaigns receives the most attention because of their visibility. However, as the links between campaign expenditure and business targets are not always clearly defined, marketing budgets are frequently subjected to mid-year cuts if the financial forecast looks grim.



● Internal departmental costs are generally set without much regard to planned programmes, generally in different levels of headcount.

● Leverage of other internal resources is particularly important in taking a more integrated view of marketing, as marketing engages the rest of the business in delivering against strategic impact factors. The cost of these resources is rarely quantified, as still relatively few companies operate activity-based costing: but it could be. A prime example might be the investment in a CRM system that can deliver benefits for marketing, sales, customer service and operations.

● External spend by other departments is incurred when marketing identifies an impact factor that requires new equipment, software, etc. For example, shortening delivery times might require investment in additional trucks in order to reach the target levels of performance specified as a competitive advantage factor.



Companies would be better prepared to respond to marketplace needs if they aligned budgets in other areas with the marketing plan, rather than seeing marketing requirements as ‘nothing to do with us’, or stealing resources, or arriving at short notice with unplanned demands, or any of the many other reasons for rebuffing marketing actions. Furthermore, not only is taking this broader view of the resources deployed by marketing more realistic, but it also positions marketing more correctly, and effectively, in the organization.





Custom and practice have led to marketing budgets being generally divided into external spend categories, such as advertising, exhibitions, print, etc, which often bear no relation whatsoever to the real goals of the business, such as increasing market share. Basing an important business process on such a weak foundation leads to budgets being treated with disrespect. As a result, budgets can be manipulated, with the consequence that companies learn nothing about whether they used their resources effectively, nor even whether they made accurate estimates of the costs of their actions.

The following section describes the process within the model for identifying the resources needed to develop and implement the actions identified as being necessary to achieve goals for a segment, and how then to compile a detailed activity-based budget.





Budget templates

The first template in this section, Table 8.4, splits the overall costs of each action recorded in the earlier templates into the external and internal components. As described above, often the only costs captured by marketing are the external costs – such as for advertising agency work, media buying and market research, and similarly for sales the costs of in-store promotions. This template also includes the internal costs for each action to enable the use of company resources to be identified and prioritized. So, for example, the costs incurred by the marketing team in developing the website brief shown in Table 8.1 would be recorded here, plus the costs for the IT team in Table 8.2. Similarly, the Benefits Dependency Network illustration described in section 8.1.1 and illustrated in Figure 8.2 would incur significant internal costs in developing the proposed intranet system, including the pilot, and training users. This template is suitable for either version of the model, as it pulls together all the actions, regardless of whether they are related to an action plan to address a single impact factor or the impact factors being addressed for a particular strategy.



The next template (Table 8.5) applies to only the strategy-based version of this stage and shows the summary of the impact factor costs for each strategy. The next two templates provide the segment totals – Table 8.6 is the total for all impact factors, and Table 8.7 is the equivalent for the strategy-based version. The final template in this section, Table 8.8, pulls together the totals for all the segments analysed via the model.

























Establishing linkages



This section is all about cause and effect. The objective is to help organizations assess what the impact is likely to be as a result of implementing the actions. However, there is no doubt that this is likely to be inconclusive. The old adage about ‘Tell me which half of my marketing spend is ineffective and I’ll stop spending money on it’ remains to some extent true – but, by linking resource allocation to defined actions that have been identified from a detailed analysis of impact factors by segment, the overall spend should be more effectively targeted.



Marketers make assumptions, consciously or otherwise, about cause and effect in planning their actions. It is well known, for example, that a discount price promotion will produce a greater response than a coupon. Such principles were established through disciplined research and recording of data, built up and repeated over a period of years. Including a test element within marketing campaigns whenever possible (eg a control group excluded from the campaign) and ensuring that necessary data on the impact of marketing activity are captured and analysed pay dividends in identifying the actions that really work.



The cause and effect of simple promotions may be observed more readily than some of those in this model, but more systematic observation and capture will inform other decisions as well. At the least, if assumptions made about the linkages between stages in the model above were quantified and captured, then communication between marketers and others in the company would certainly be better and expectations would be clearer.

For example, a 2 per cent increase in market share for a segment may be seen by one person as a good response to an action or set of actions, while someone else may count anything less than 5 per cent as poor. Unless the linkage between the action and change can be demonstrated, such differences do not surface, leading to considerable misunderstanding and differences in perception.





Quantified linkages or gearing may be best expressed as a range rather than a single number. Then the outcome can be modelled and applied in a business case for both ends of the range, which helps managers to make better decisions about allocation of resources.

The more data that are collected and effectively analysed and interpreted, the more the organization can learn and improve. In many companies, data may be collected for marketing activity, but the quality of the recording is so poor that the same mistakes are made over and over again. Therefore, in spite of having multiple opportunities to learn, the organization has no mechanism for capturing data across different time spans and no mechanism for learning. The objective is to develop a knowledge base culture, as illustrated in Figure 8.3. Not only does this require an investment in the processes and tools to capture data and turn data into knowledge, but there must be a company culture that appreciates the value of being knowledge based in establishing and maintaining competitive advantage. Increasingly, firms invest in better data about their customers’ behaviour and will test activities continually and responding in real time: the ‘big data’ and Marketing Automation promises.



The question is: what price should be placed on data? Owing to the much reduced cost of capturing and storing data, it is tempting to take every opportunity to collect and hold as many data as possible. But every decision has an opportunity cost, and this applies just as much to customer-related data as to other areas of the business. In addition, organizations are often faced with alternative strategies for obtaining data – they can be built up over time from contacts between the organization and its customers (internal), or the organization might be able to obtain data more quickly, but at a much higher cost, from a data vendor (external). Figure 8.4 shows an extension to the data value chain process that attempts to put a value to the business of a data item and thereby helps decide whether it is worth collecting, and which route, internal or external, is the more cost-effective.









In effect, the process is all about building a business case for obtaining data, in terms of the value that data can provide. It is unusual for this value to be simply extracted from the item on its own; it is usually obtained from its association with other data items through data analysis and modelling.



The following hypothetical scenario illustrates the key points in the above model. The marketing department of a car breakdown service organization decides that retention could be improved by factoring in the number of cars in the household. This would enable a differential pricing strategy to be introduced and additional upsell opportunities to be introduced into the retention cycle. It would also help segment customer value more effectively, which would be reflected in reducing the marketing effort directed at low-value customer segments. Marketing therefore creates a business case for collecting the data by estimating the increased financial contribution to the business, comprising additional revenue and reduced costs. Against this revenue are offset the estimated costs of obtaining the data and the costs incurred in turning the data into knowledge. In this case, the business had the option of either purchasing the data from a lifestyle database company or collecting the data internally through, for example, contacts made with customers through the call centre call and revised application forms. Owing to the significant costs by either route, a test is quickly set up using a small quantity of external data. This test identifies that the figures in the business case are achievable, and the decision is taken to collect the data internally. Owing to having developed a business case, the impact on the current productivity levels of call handling can be shown to be a relatively small price to pay compared with the positive overall return to the organization.



This helps ‘sell’ the new requirement to call handling management. The key message is that data acquisition must be business led. The process also identifies the metrics to check whether the cost–benefit analysis forecast was in fact achieved.





In applying business case techniques, companies may find it useful to separate marketing investment for longer-term goals (eg building brand or customer equity), requiring evaluation over an extended period of time, and marketing operations costs directed at shorter-term results (eg acquiring new customers).



The points in the model where linkages can be established are shown in Figure 8.5. The term ‘gearing’ is used, as the objective is not simply to look for incremental uplifts in outcome, but to identify situations where a particular insight gained from the segment and impact factor analysis has a disproportionate impact on competitive advantage.

The next template in this chapter (Table 8.9) captures the expected impact of implementing the actions for the impact factors for a segment of customers. The information contained in the template covers:



● actions (by impact factor or strategy): as identified in the earlier analysis;

● metric: how the effect of implementing each action will be measured;

● current: what the current level of performance is, if applicable or currently known;

● change: what is expected to be the impact of the action;

● segment performance metric: which segment metric will be expected to be influenced by this action;

● current: the current level for this segment metric;

● change: the change expected in this segment metric as a result of the action being taken.













The expected impact on the segment metric will probably be an estimate agreed by the team, unless there is a previous example to provide more accurate guidance. The example shown in the template illustrates the type of information that might be included.

Under qualifying factors, the example shown is the need to improve data quality, which is considered to be below expected standards. The impact is that an unacceptable proportion of mailed items are returned by the Royal Mail marked as ‘gone away’ (the person the item is addressed to no longer lives at that address). Two metrics are shown to judge performance plus the current level of performance and the impact on the levels of address errors and ‘gone away’ anticipated by taking action. Finally, there is the metric of customer retention levels, which will be used to judge the impact at segment level, plus the current level of retention and the expected change resulting from improving data quality. Similarly, the impacts for examples

of actions under competitive advantage and productivity factors are also shown. In terms of the productivity factors, the costs are expressed in terms of the favourable impact on gross margins.

A similar template (Table 8.10) can be used to record the linkages between the actions and impact factors.











