Planning With Passion

Strategic planning 101.

By Greg Kitzmiller

Strategic planning. Entrepreneurs often say they don’t do it. Big firms do it methodically and file the plans away. The question is, do firms in the nutraceutical arena regularly do marketing plans for each of their brands?

The tablet-based supplement business is not doing well, as many firms seem blown by the wind toward the latest fad ingredient. The total food business is estimated to be only growing at nearly 2%, although analysts say specific categories like organic food and natural products are experiencing double-digit growth. New products are introduced daily (literally, as Productscan Online says over 13,000 new food products were introduced last year), but are they successful?

This brings us to a discussion of marketing planning—creation of a specific document that spells out exactly what the objectives and stra­tegies are for a brand, from its target market and elements of the marketing mix to an overview of competition and contingency planning. Writing about a marketing plan is a bit dangerous, as anyone with a business degree likely feels he or she can write about it him/herself. But I have a different point. Do you do one? Do you sleep with it? Does it live? My experience is that some marketers develop a document with objectives that might as well contain a wish list of trips they want to make for the year. Why? Some marketers don’t go through the planning process with excitement. When entrepreneurs talk about what they are going to do in a market, they get all excited. Some marketers have enthusiasm but the planning process seems like a chore compared to getting a campaign from an ad agency or changing the package or planning focus groups. All of those are tactics and may be used. Yet stepping back and evaluating trends and determining exactly why, how and who will buy may get lost in the tactics. Making that plan about what we really are going to do and changing it when we get new information really should be what the marketing plan is all about. Everyone in a multifaceted firm should understand something about the marketing plan for any brand he or she works on. It is not necessary for an R&D person to understand the GRP’s in a media plan (and if you don’t know what I mean then you’ve got my point). But everyone should have the same spirit that an entrepreneur does about understanding who may use this product and why it is exciting and have a willingness—make that eagerness—to change the plan when situations change. Much of this lies in the situation analysis.

Let’s look at planning from the entrepreneur’s viewpoint as if it would be placed into a formal plan (see Table 1). The entrepreneur with a new organic product observes that organic foods in his corner of the world are hot. He does research. Although companies claim they don’t do market research they usually ask a lot of people questions and then give people products to try; that’s re­search, whether statistically reliable or not. The company then determines who it believes is buying organic foods. Katherine DiMatteo, executive director of the Organic Trade Association, has stated that only 1% of the U.S. population are organic food consumers. That statistic would often be enough to dissuade many big firms. Yet Hain Foods, now partly owned by Heinz and part of the Hain-Celestial Group, grew from $58 million in 1995 to $400 million in fiscal 2000. While part of that growth is clearly from acquisition in the natural and healthy products arena, part of it is from the growth of organic products. Hain believed in organic and natural at the start of the curve. It served a niche market.

The plan starts with a situation analysis. This should be an almost emotional piece that states what particular people are going to use this product. Identifying very carefully who the target is, what they are like and trends within the group or groups is a major first part of a marketing plan. Recognizing that many successful products start as niche products, most markets today are niche markets. I’ll bet when Ms. Di Matteo defines the organic product consumer she is defining those individuals who are committed to buying all organic products. That likely is not what is contributing to the growth. We live in a society in the U.S. where people want to eat better, where natural food sales are increasing and we have the highest level of obesity ever. Low-fat products are declining while natural products are increasing. Are the people buying organic foods in the grocery market, which is where Hain Foods Group says its future increases will come from, making this organic or natural purchase as just one little step in their overall quest to do better? Are these the organic committed consumers? Probably not. What is our niche? We need to figure out exactly and not rely on some grand healthy eating trend.

Next we must thoroughly understand the competition. This is not just the direct competition, but what people use when they are not using this product. Are our organic purchasers just as likely to put frozen vegetables in their shopping cart if there is no organic produce? If these customers are the ones who are mostly “trying to do better,” then they may be only getting one or two servings of vegetables a day. Then is our competition the juice that they’ll drink so they can at least say they’ve had a vegetable today? Substitute product competition is extremely important. Why is Coke launching an energy drink? Because per capita consumption of cola soft drinks is soft and the volume is going to new age beverages, not to Pepsi.

This leads us to market trends. The big firms will have their IRI or Nielsen analysis of trends. The entrepreneur will have to read from magazines and newspapers. But the devil is in the details, as they say. It is as much what you look for and which questions you ask as it is having mounds of data.
Finally, it’s worth closing with the last line of Table 1, contingency planning. It is very helpful to do some “what if” exercises. Pepsi bought SoBe and Coke launches an energy drink. How is everyone else in the beverage business likely to react? I’d sure want to think about it if I was running one of the brands.

NW

Greg Kitzmiller is a marketing faculty member at Indiana University’s Kelley School of Business, Bloomington, IN. He is also co-director of the Global Business Information Network (GBIN) at the Kelley School of Business. He combines international and domestic strategic and marketing management experience with university teaching, professional speaking, executive education and consulting. Mr. Kitzmiller can be reached at 1309 East Tenth St., Bloomington, IN 46405-1701; 812-855-1004; Fax: 812-855-6440; E-mail: gkitzmil@indiana.edu.