Why Marketing Planning is so important

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Why Marketing Planning is so important

Marketing planning can be the difference between success and failure. Here’s why. 

“Often, strategy in smaller companies is emotional decisions with the illusion of some logic” Jacqueline Rojas President of Tech UK.

There is no doubt that small and medium-sized enterprises are hugely important to most economies. These “mighty minnows” they contribute around 51% of UK GDP and 60% of private sector employment (Federation of Small Businesses 2017).

However, smaller businesses are also plagued with high failure rates and poor performance. Research in the area of strategy has consistently confirmed that SMEs that do engage in strategic planning (compared to those that do not) are much more likely to be successful. But (perhaps surprisingly), most small and medium-sized businesses do not engage in any meaningful strategic planning.

By strategic planning, I mean the setting of long-term organisational goals, the implementation of plans to achieve these goals, and the allocation of resources to realise these goals in order “[for a company] to gain as efficiently as possible, a sustainable edge over its competitors”.[Ohmae 1983]

“If you don’t know where you are going, any direction will do.”

The problem for many successful new business owners is the difficulty of leading and managing a business once it grows beyond a certain size. It often requires a change in the way in which the business is managed. And according to all the research, engaging in strategic planning is key to long term success.

So, what are the benefits of strategic planning?

As I suggested earlier, businesses have a large number of benefits over those businesses that don’t have a strategic plan. The evidence shows that strategic planning is a cornerstone of business success for small businesses. Some of the results of strategic planning include:

  • Higher sales growth
  • Higher returns on assets
  • Higher margins on profit
  • Higher employee growth
  • Higher employee satisfaction
  • Lower risk of business failure.

So why don’t small businesses choose to engage in the strategic planning?

There are have been two theories explaining why small businesses don’t plan strategically. The two ideas look at the problem in different ways.

Theory One is that business owners are all fundamentally motivated by purely economic factors and therefore wish to maximise returns. And as such, there a number of “barriers” either real or perceived that are getting in the way of business owners focusing on long-term planning activities. Some of the key barriers are listed below.

  • Lack of knowledge / Expertise
  • Loss of control – a structured planning process may conflict with their own entrepreneurial instincts.
  • Internal implementation barriers – staff numbers and capabilities
  • Business Environment – it is too turbulent or uncertain or state of the business cycle.
  • Lack of Time

Theory Two is that the reason does not lie with these barriers but in fact, it is with the owner’s motivation, in other words looking at the reasons why the owner set up the business. In fact, many owners of small businesses are not motivated by economic factors, and may actually be growth-averse or only interested in “limited” or “satisfactory” growth. Such owners put a higher value such things as:

  • Being their own boss
  • Independence
  • Personal freedom.
  • Lifestyle considerations

Final Word

For any of us who are passionate about strategic planning, we see its value not only in helping to make businesses more profitable but often make such businesses more vibrant and exciting places to work. Those businesses that are focused on maximising returns are much more likely to embrace strategic planning.

However, people run businesses for different reasons and they are entitled to run their businesses in the way that suits their own needs. And for many owners, strategic planning is likely to be seen as an unnecessary process that adds little value to their long term goals.

So, if you are looking to work with or for a smaller business, trying to figure out the owner’s motivations may give you some clues about whether your role will be simply to keep the wheels turning or whether you are likely to be involved in more ambitious projects.