Marketing Plan Development 101: The Importance of Developing a Marketing Plan for Public Transit Agencies & Commuter Assistance Programs

Transcription

1 Marketing Plan Development 101: The Importance of Developing a Marketing Plan for Public Transit Agencies & Commuter Assistance Programs Mark Glein, PhD, Marketing Florida State University

2 Marketing Plan Development 101: The Importance of Developing a Marketing Plan for Public Transit Agencies & Commuter Assistance Programs Table of Contents Organizational Opportunities and Resources 2 Establishing a Mission and Goals 3 Developing a Corporate Strategy 3 Developing a Marketing Strategy 5 Creating the Marketing Plan 8 tdmpop.org is a project of the Marketing Institute at Florida State University s College of Business and funded by the Florida Department of Transportation.

3 The Importance of Developing a Marketing Plan for Public Transit Agencies & Commuter Assistance Programs A strategic market plan is an outline of the methods and resources required to achieve a transit organization s goals. Strategic market planning concerns the overall direction of the business. It involves not only marketing but all functional aspects of a business that must be coordinated (finance, production, human resources, and marketing). The process of strategic market planning yields a marketing strategy that is the framework for a marketing plan. Figure 1 illustrates the components of strategic market planning. The process establishes the public transit organization s overall goals by assessing its opportunities and resources. After the organization has determined its opportunities and threats within the marketplace, it can then decide on its overall goals and how each business unit will help achieve those goals. Marketing objectives must be designed so that their achievement will contribute to the corporate strategy and so that they can be accomplished through efficient use of the organization s resources. Figure 1: Components of Strategic Market Planning A marketing plan is a written document that specifies the public transit organization s resources, objectives, marketing strategy, and implementation and control efforts planned for use in marketing its operations. The marketing plan describes the organization s current position or situation, establishes marketing goals and objectives for the transit system, and specifies how the organization will attempt to achieve these objectives. The marketing plan deals, primarily, with implementing the marketing strategy as it relates to the selected target markets and the marketing mix.

4 ORGANIZATIONAL OPPORTUNITIES AND RESOURCES A transit organization must first evaluate its opportunities and the resources it has available to take advantage of those opportunities. There are three major considerations in assessing opportunities and resources in the public transit marketplace: environmental scanning, evaluating market opportunities, and understanding the organization s capabilities and resources. Environmental Scanning: This process refers to the collection of information about forces in the public transit system s marketing environment. Companies can derive substantial benefits from establishing an environmental scanning, or monitoring, group within the strategic planning group to conduct environmental analysis. This is important because results of forecasting research show that even simple quantitative forecasting techniques outperform the unstructured intuitive assessments of experts. Market Opportunities: Marketing opportunities refer to the right combination of circumstances and timing that permit an organization to take action toward reaching a target market. For example, the state of Florida has diverse groups of potential customers that offer unique target markets for various communities within the state. The ever-increasing number of senior citizens relocating to Florida, and the high number of college students, creates target markets with unique opportunities. For instance, high gasoline prices combined with the number of elderly wanting to be mobile in the local community and the number of college students needing transportation has led to the use of specialized public buses for these population segments. The elderly require a public transit system that utilizes buses customized for easy on and off access while college students require buses with Internet capability and longer hours of operation. Capabilities and Resources: The capabilities and resources of a public transit organization relate to the distinctive competencies that it has developed to perform well and efficiently. Some organizations use their competencies to create a competitive advantage over their rivals. A competitive advantage is created when a company matches its distinctive competencies to the opportunities it has discovered in the market. 2

5 Establishing a Mission and Goals The goals of any public transit organization should be derived from its mission. Most successful public transit systems create a mission statement, which is a long-term view, or vision, of what the organization wants to become. A mission statement highlights the goals of an organization and represents what that organization hopes to achieve through its distinctive competencies (noted in the previous step). Several reasons exist for a public transit organization to compose a mission statement: 1. A mission statement provides the public transit organization with a clear purpose and direction, which will help the organization stay focused on its reasons for being in business. 2. A mission statement describes the unique focus of the public transit organization that helps to differentiate it from similar competing organizations. 3. A mission statement provides specific direction and guidelines to top managers when selecting from among multiple options. This helps them decide which business opportunities to pursue (such as a higher frequency of customer pick-up or implementing a service for the elderly). 4. A mission statement provides guidance to all employees and managers of a public transit organization, subsequently functioning as the glue that holds the organization together. Developing a Corporate Strategy Corporate strategy determines the means for utilizing resources in the areas of finance, operations, human resources, marketing, and production to reach the organization s goals. A corporate strategy decides not only the scope of the business but also its resource deployment, competitive advantages, and overall coordination of all functional areas. Two questions must be addressed when establishing a corporate strategy: What is our business? What should our business be? To elaborate further, the term corporate in this context does not only apply to large-scale public transit "corporations" but is used by all organizations from the smallest (such as Tallahassee) to the largest public transit systems in major metropolitan cities (such as New York, Chicago, and Los Angeles). While the basic answers to the two corporate strategy questions may be "to provide the 3

6 community with convenient and affordable public transit alternatives," each of these public transit systems target a certain clientele. Therefore, a thorough analysis of the reason why a specific public transit organization is in business is necessary to achieve corporate and/or community goals. 4

7 Developing a Marketing Strategy The next phase in strategic market planning is the development of a marketing strategy. A marketing strategy for a public transit organization is typically designed around two components: the selection of a target market and the creation of a marketing mix that will satisfy the needs of the selected target market. A marketing strategy provides a detailed explanation of how the public transit organization will achieve its marketing objectives. A thorough understanding of the customers and their needs is the first step in developing a proper strategy. After that, the organization can use its own strengths or distinctive competencies to fill those needs better than the competitors. A target market is the specific group of people that the agency wishes to address. Ideally, this group of people has a need for public transit and has the ability, willingness, and authority to purchase such services. Selecting the appropriate target market may be the most important decision a public transit organization must make during the planning process. For example, in a large, high-traffic city such as New York the main target market may be middle to upper class income people working in the downtown area. In a smaller city such as Tallahassee, Florida, however, the primary target market may be lower to middle class income people traveling throughout the city. While these brief examples do not necessarily reflect actual target markets, Figure 2 highlights the necessity of establishing the appropriate target market based on the specific public transit setting. Figure 2: Target Market Selection Process The selection of a target market serves as the basis for creating the marketing mix to satisfy the needs of that group. The elements of the marketing mix product, distribution, promotion, and price are referred to as the marketing mix variables because each can be varied or changed to accommodate the needs of the target market. An important point here is that the term mix describes the decisions that must be made for each variable in order to precisely match the needs of the target market. The four marketing mix variables are defined in Figure 3 and the following paragraphs. 5

8 Figure 3: Customer Centric Marketing Mix PRODUCT: A product can be a good, service or idea. In the case of transportation, the product is a combination of all three since the product received by the customers includes the physical means of transportation (good), the application of human and mechanical efforts that provide intangible benefits to the customer (service), and the philosophy or image of the transportation provider received by customers (idea). PRICE: Price refers to the decisions and actions associated with establishing pricing objectives and policies and determining product prices. Price is critical in the marketing mix as customers are concerned with the value of the services they receive. High prices can be used to establish a product image; however, higher prices lead to higher expectations of quality (such as friendly and wellgroomed drivers; clean and well-appointed vehicles; and prompt and on-time service). PROMOTION: Promotion refers to activities used to inform individuals or groups about the organization and its products. Promotion is often used to increase public awareness of transportation service options and new or existing services offered by the transportation provider. Promotion can also help sustain interest in established services that have been around for decades, such as transit systems. 6

9 DISTRIBUTION: The distribution, or place, component of the marketing mix refers to the convenience and availability of the transit system when customers want and need it. It is important to offer customers transportation services at the times and locations they desire in order to maximize satisfaction. 7

10 Creating the Marketing Plan The final stage of the strategic market planning process is developing a marketing plan, or the systematic process of assessing market opportunities and resources, determining marketing objectives, defining marketing strategies, and establishing guidelines for implementation and control of the public transit organization s marketing program. The outcome of this process is a formal, written document that outlines and explains all the activities necessary to implement specific marketing strategies. Marketing plans vary with respect to the time span involved. Generally, short-range plans outline one year or less and moderate-range plans outline two to five years. It is preferable to keep the marketing plan to a period no longer than one year since many environmental factors change frequently. Technological advances can happen quickly, as well, and the ever-changing price of fuel is something that cannot be projected for a long period of time. For most public transit systems it is beneficial to form strategic marketing plans covering the short-range while constantly keeping an eye on the long-term future of the organization. Developing clear, well-written marketing plans is important. The time-based marketing plans are used internally among employees for communication purposes. They cover the assignment of responsibilities, tasks, and schedules for implementation purposes. They also present objectives and specify how resources are to be allocated in order to achieve those objectives. Finally, they help marketing managers monitor and evaluate the performance of a specific marketing strategy implemented by the public transit system. The following components are included in a basic marketing plan: Executive Summary Environmental Analysis Strengths, Weaknesses, Opportunities and Threats (SWOT) Marketing Objectives Marketing Strategies Implementation Evaluation and Control 8

11 Executive Summary --The executive summary is a synopsis of the entire marketing plan (often only one or two pages in length). The summary includes an introduction, an explanation of the major aspects of the marketing plan, and a statement about the costs of implementing the plan. As such, the executive summary provides an overview of the plan (as opposed to detailed information) to highlight key issues and their roles in the planning and implementation process. The executive summary is an important component of the marketing plan because it is often shared with people outside the organization. For example, the executive summary may be useful to the public transit organization s funding agents when it becomes involved in the financial aspects of the marketing plan. In addition, suppliers and investors may be given access to the executive summary if they play key roles in implementing the plan. Environmental Analysis -- The environmental analysis provides information about the public transit organization s current situation with respect to the marketing environment, the target market, and the organization s current objectives and performance. The first issue in the environmental analysis is an assessment of the environmental forces in the marketplace (Fig. 4). Figure 4: Components of Strategic Marketing 9

12 Both internal and external forces are at play and should be considered. The internal forces that relate to the operations of the public transit organization include the organization s current political environment, the availability and deployment of human resources, the age and capacity of equipment or technology (such as public transit vehicles), and the availability of financial resources. The organization must also assess the external forces affecting its operations. These external forces include the following: Competitive forces, which are transit organizations that market similar or alternative services in the same geographic area. 1 Economic forces, which refer to general economic conditions that affect the public transit marketplace (for example, the overall state of the economy), as well as the buying power and willingness of customers to spend resources on public transit offerings. Political, legal, and regulatory forces of the marketing environment that are closely interrelated. Legislation is enacted, legal decisions are interpreted by courts, and regulatory agencies are created and operated, for the most part, by elected or appointed officials. As such, legislation and regulations (or the lack thereof) reflect the current political outlook and, therefore, have the potential to influence marketing decisions and strategies of public transit organizations. Technological forces, which refer to the application of knowledge and tools to solve public transit problems and to perform tasks more efficiently. A public transit organization has to institutionalize a procedure for anticipating the effects of new products (such as more fuel efficient vehicles or Wi-Fi capabilities) and processes on the organization s public transit offerings. Sociocultural forces are the influences in society and its culture that bring about changes in attitudes, beliefs, norms, customs, and lifestyles. These forces affect how people live and influence where, how, and when people use public transit systems as well as what kind of system they use. For example, the use of public transit systems as a means of transportation in many European countries and larger U.S. cities is accepted at all income levels while in many smaller U.S. cities the use of "public transportation" is considered an indicator of being poor. 1 Some public transit agencies and commuter assistance/rideshare agencies operate under a false assumption that because they are the only agency to provide said service, that there is no competition. This is not true. Any company, firm, or organization that encourages choice riders to purchase a vehicle creates a competitive force for your service. 10

13 Strengths, Weaknesses, Opportunities & Threats -- Your marketing plan and overall marketing strategy should include an acknowledgment of and responsive strategy to your organization s strengths and weaknesses, often referred to as the SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis. The analysis of the strengths and weaknesses focuses on internal factors that give the public transit organization certain advantages and disadvantages in meeting the needs of its target markets. These factors are derived from the environmental analysis. In addition, strengths and weaknesses should be analyzed relative to the market needs and the competition to allow the organization to determine what it does well and what it needs to improve. Strengths refer to competitive advantages or distinctive competencies that give the public transit organization an advantage in meeting the needs of its target market. Weaknesses refer to any limitation that a public transit organization might face in marketing strategy development or implementation. Weaknesses should also be examined from the customer s perspective since customers often identify weaknesses not readily identifiable to the organization. The second section of the SWOT analysis examines the opportunities and threats that exist in the public transit marketing environment. It focuses on factors that are external to the organization. While both opportunities and threats exist independently of the organization, they can affect its operations significantly. An easy way to differentiate a strength or weakness from an opportunity or threat is to ask the question, Would this issue exist if the public transit organization did not exist? If the answer is yes, then the issue should be considered external to the organization. The externally focused opportunities and threats are derived from the environmental analysis. Similar to the strengths and weaknesses, opportunities and threats should be analyzed relative to the public transit market needs and the capabilities of competitors. Opportunities refer to favorable conditions in the environment that could produce rewards for the public transit organization if acted upon properly. Threats refer to conditions or barriers that may prevent the public transit organization from reaching its objectives. 11

14 Marketing Objectives -- This section of the document describes the marketing objectives that underlie the public transit organization s marketing plan. A marketing objective states what is to be accomplished in the broad scope of the operations of the public transit organization through marketing activities. The marketing objective(s) should be based on a careful study of the SWOT analysis and should contain objectives related to matching strengths with opportunities and/or the conversion of weaknesses or threats. The marketing objective of the transit provider should be aligned with the overall goals of the agency. Marketing objectives for a public transit organization can be stated in terms of product introduction, product improvement or innovation, sales volume, profitability, market share, pricing, distribution, advertising, or employee training activities. Marketing Strategies -- Marketing strategies are a means to achieve the marketing objectives outlined earlier, but also a means for the public transit organization to achieve a competitive advantage and, perhaps, identify a sustainable competitive advantage (which is to say, an advantage that cannot be copied by the competition). The term marketing strategy refers to how the public transit organization will manage its relationships with customers so that it gains an advantage over the competition. In more detailed terms, however, this means that the public transit organization has to develop and maintain both a target market and an appropriate marketing mix to satisfy the needs of this target market. Target markets are developed by segmenting the existing and potential public transit market by identifying a series of variables: Demographics variables (age, gender, race, ethnicity, income, education, occupation, family size, family life cycle, and social class). Geographic variables (region, urban/suburban/rural, city size, county size, state size, market density, and climate). Psychographic variables (personality attributes, motives, and lifestyles). Behavioristic variables (usage frequency, benefit expectation, brand loyalty, and price sensitivity). Target markets are then maintained by consistently providing the customers with public transit offerings that satisfy their needs and meet their expectations. This is done via the marketing mix 12

15 variables. These variables were defined earlier in this document and illustrated with Figure 3, but it may be beneficial to reiterate them here, followed by a more detailed discussion of the components of each marketing mix variable. Product: A product is a good, service or idea. In the case of the public transit system, the product is a combination of all three in that the public transit offering received by the customers includes the physical element of the bus (product), the application of human efforts that provide intangible benefits to the customers (service), and the image of the public transit offering received by the customers (idea). Five elements of the public transit offering should be examined: 1. Product life cycles refer to the progression of the public transit offering through four stages: a. the introduction stage the initial stage of the public transit offering (its first appearance in the marketplace) when sales are zero and the profits are negative b. the growth stage the stage of the public transit offering when sales rise rapidly and profits reach a peak and then start to decline c. the maturity stage the stage of the public transit offering when the sales curve peaks and starts to decline as profits continue to decline d. the decline stage the stage of the public transit offering when sales fall rapidly, signaling the time for the organization to revise its offerings to the customers 2. Product differentiation refers to the process of creating and designing public transit offerings so that consumers perceive them as different from the competing offerings. Important elements of differentiation are the overall quality of the public transit offering, the design and features of the public transit offering, and the support services of the public transit offering. 3. Public transit offering positioning and repositioning refers to the decision and activities that create and maintain a certain concept of the public transit organization s offering in customers minds. 4. Organizing to manage public transit offerings based on the traditional functional form of organization in which managers specialize in business functions such 13

16 as advertising, sales, and distribution often does not fit a public transit organization s needs. As such, the public transit organization has to find an organizational approach that can accomplish the tasks necessary to develop and manage its offerings. 5. The unique characteristics of public transit offerings involve several elements that are quite different than other products and need to be specifically addressed in the marketing plan. These are intangibility (being unperceivable by the senses), inseparability of production and consumption (being produced and consumed at the same time), perishability (inability be stored for future use), heterogeneity (variation in quality, which may be more apparent than in other products), clientbased relationships (interactions that result in satisfied customers who repeatedly use the public transit system over time), and customer contact (interaction between provider and customer needed to deliver the public transit offering). Distribution: The distribution, or place, component of the marketing mix refers to the availability of the public transit system when the customers need for it varies from the form in which they want it. In other words, the customers do not want to wait for the bus to show up at their stop. In addition, they want to feel safe on the bus (as in driving safety and general safety related to serving areas). Intensity of market coverage refers to the broad availability of the public transit system when, where, how the customers desire it (for example, the number of covered routes and the frequency of pick-ups). Relationships with other public transit organizations offer an integrated and possibly larger coverage area than is possible by one organization (i.e., similar to many of the airline partnerships throughout the world). 14

17 Promotion: Promotion refers to communication between the public transit organization and its customers to facilitate satisfying exchange relationships. This often means that the customers need to be convinced that public transit is a good alternative to driving their own car or commuting with a friend or colleague. Within the promotional mix, four elements can be used to communicate with customers: 1. Advertising paid, non-personal communication about the public transit organization and its offerings that is transmitted to a target audience through a mass medium such as television, radio, newspapers, magazines, , public transit vehicles, or outdoor displays. 2. Public relations free, non-personal communication activities used to create and maintain favorable relations between a public transit organization and its audience. 3. Personal selling a personal, paid communication that informs customers and persuades them to use the organization s public transit system (this form of promotion is used sparingly by public transit organizations). 4. Sales promotion an activity and/or material meant to induce the consumers to use the organization s public transit system (such as rebates or buy a one-way ticket and get a free return). 15

18 Price: Price refers to the value exchanged for the products in a marketing exchange. Obviously, the most common form of value for a public transit system is money, and the product received is the use of the public transit system to get to a specific location. More importantly, however, is the way in which price is used in the marketing mix (for example, a high price leads to the expectation of a higher quality public transit system while a more modest price may simply place the focus on getting from point A to point B). Factors that affect pricing decisions include organizational and marketing objectives, pricing objectives, costs, other marketing mix variables, organizational partners expectations, customers perceptions, competition, and legal and regulatory issues. Pricing involves the following: The development of pricing policies The assessment of the target market s evaluation of price The determination of demand The analysis of demand, cost, and profit relationships The evaluation of competitors prices The selection of a pricing policy The selection of a pricing method The determination of a specific price 16

19 Marketing Implementation -- Marketing implementation is the "how?" of the marketing plan. This process has several components, all of which must be integrated if the implementation is to succeed. Marketing implementation is the process of putting marketing strategies into action. Components that are important in implementation include marketing structure marketing strategy leadership human resources organizational resources organizational systems These components function as determinants of the shared goals of the public transit organization. To properly address these components, three areas of marketing implementation need to be assessed in this stage of the marketing plan: 1. Marketing organization refers to the structure and the relationships of a marketing unit, including lines of authority and responsibility that connect and coordinate individuals and strongly affect marketing activities. A marketing-oriented organization concentrates on discovering what the public transit customers want and on providing it in such a way that it achieves its objectives. This type of organization focuses on customer analysis, competitor analysis, and the integration of the organization s resources to provide customer value and satisfaction, as well as long-term profits. 2. Activities and responsibilities are planned and organized by marketing managers who provide purpose, direction, and structure for marketing activities. Understanding the issues associated with marketing implementation, as well as selecting an overall approach, sets the stage for the implementation of specific marketing activities. The bottom line is that the collective efforts of individual people within the organization are ultimately responsible for implementing the public transit organization s marketing strategy. 3. An implementation timetable is a necessity for the effective implementation of selected marketing activities. Successful marketing implementation requires that employees know the specific activities for which they are responsible and the timetable for completing each activity. Establishing an implementation timetable involves several steps: 17

20 a. Identifying activities to be performed b. Determining the time required to complete each activity c. Separating the activities that must be performed in sequence from those that can be performed simultaneously d. Organizing the activities in the proper order e. Assigning the responsibility for completing each activity to one or more employees, teams, or managers Evaluation and Control -- To achieve marketing as well as general organizational objectives, marketing managers must effectively control marketing efforts. The marketing control process consists of establishing performance standards, evaluating actual performance by comparing it with established standards, and reducing the differences between desired and actual performance (Figure 5, below). In following the marketing control process, performance standards, financial controls, and monitoring procedures (audits) have to be established. Figure 5: Marketing Control Process 18

21 Performance standards refer to the effectiveness of the public transit organization in meeting its stated objectives. The objectives should be stated in the marketing plan in terms of profits, sales, costs, or communication standards. The use of sales figures to evaluate a public transit organization s current performance (such as revenue generated via public transit ticket sales) is a common way of evaluating performance standards. Financial controls are often established via a marketing cost analysis that breaks down and classifies costs to determine which costs are associated with specific marketing activities. Monitoring procedures (audits) involve the systematic examination of the public transit organization s marketing objectives, strategies, organization, and performance. Consistent monitoring and evaluating of the marketing plan is necessary to ensure a successful strategy is in place. 19