A good strategy starts with a good understanding of the current and future conditions in which a business is operating. Whether you call it, diagnosis, situation analysis, or even at its simplest; background, it is imperative that before starting to develop a strategy a comprehensive appraisal of the factors that will influence your plan are identified and understood.
Too often I see marketers and senior personnel wanting to dive straight into the activation plan (or calendar). As Benjamin Franklin said, “If You Fail to Plan, You Are Planning to Fail”. If you do not understand your environment and where it is heading, and if you fail to define a clear strategy your activation initiatives will undoubtedly always come up short.
Having worked in several different businesses, across many sectors I have seen numerous approaches to conducting a situation analysis. The formula I used during my time at Kimberly Clark, the home of iconic brands such as Andrex, Kleenex, and Huggies has been by far the most comprehensive, and one I still advocate today.
KC taught the 6C model, making it very easy to remember where you should immerse yourself to get a rounded perspective of business influencing factors. The C’s are (in no particular order):
Company
Climate
Category
Customers
Consumers
Competitors
Let me break these down for you a bit further and give you an overview of the type of information you want to obtain.
Company
Your company may already have defined its long-term ambitions and goals and you need to understand what these are to ensure when you come to write your plan you are laddering in the same direction.
For Brand Managers, the company may be abbreviated to the brand. How is your brand performing? What role does it play in the company portfolio? What is the P&L telling you? How are your costs structured? What is the current product mix and how does impact the financials? What operational advantages or constraints exist? How secure is your supply chain from the procurement of raw materials through to onward distribution? What is your brand positioning, is it obvious by looking at your package and communications? What are your brand health metrics, and how are they performing?
Within Company you are fundamentally looking to understand all the opportunities and restraints, so you can work out how to leverage or mitigate.
Climate
The climate is what academics or traditional marketers refer to as PESTEL analysis. (Political, Economic, Social, Technological, Environmental, and Legal). It looks at the influences on businesses that are outside of a company’s control.
For example, the current Ukrainian and Russian conflict has led to shortages of grain and increases in fuel prices. When speaking with the Managing Director of a bread manufacturer he stated one of the biggest financial risks to his business was the increased cost and supply of grain and the cost of fuel to power the overs to bake the bread. Increasing diesel used for the distribution of his product was also causing pressure on the P&L and during a cost of living crisis, shoppers are trading down from branded bread to own label. These external influences have a significant impact on his business and consequently the strategic choices he makes.
Category
Applicable to both product and service providers the category is the space in which you operate. For example, Coca-Cola operates within the soft drink category. Bumble operates within the dating category and Netflix, the streaming category within the entertainment market.
A category analysis seeks to understand the current and future dynamics of the category. For example, when I started working in marketing for Veetee Rice, the average price of a pack of microwave rice was £2.49. Within 5 years the average selling price had dropped to just £1. By monitoring the category we knew deflation was coming and we looked at other ways to protect margin.
As a marketer you need to understand your category; what are the sub-categories within? How is the category performing? What is the product or brand mix? Where is the money generated? What are the sources of future growth and what value can be attributed to each growth driver? Who are the key players? Who are the challengers?
Category changes must be identified, understood, and faced. If you do not see them, you will not be able to plan for them.
Customer
Customer refers to the organisation(s) that your business sells to, who then go on to sell your product to the end user. For example, most food businesses distribute their brands via supermarkets, making the supermarkets their customers. DTC (Direct to consumer) businesses will not have a customer, but they will have a consumer and maybe a shopper as an intermediary.
Considerations concerning customers may include their ambitions, strategies, and priorities as well as their reach and influence with your target consumers. If you have a sustainable proposition you may choose to work with customers who share your ethics and who actively seek to do no harm and/or do good.
Knowing your customers’ performance could influence how deep a relationship you wish to build or much you will invest with them. Understanding your customers helps you identify first whether they are aligned with you and suitable for your business/brand and the image you want to project. If you are a budget fashion brand, you are unlikely to choose to distribute your product in high-end retail stores like Harrods or Selfridges. Understanding your customer also helps you talk a common language. For example, Tesco has an area in their store they call the “power aisle” other retailers may call this the “seasonal aisle”.
Comprehension of your customers’ needs and requirements makes the sale easier and the relationship stronger.
Consumer
Who are they? How do you define, profile or segment them? Which customer group do you consider your strategic target? What are their needs? What trends are emerging amongst this group? What is influencing their behaviour and how does this impact your choices? You should seek to understand the customers' purchase journey; pain points and joy points. What habits do your customer have? What triggers them to repeat purchases? All this insight is instrumental in helping you define your strategy and the tactics you will need to deploy against that strategy.
If your consumers' awareness of you is low, that is a very different challenge compared to knowing you have high awareness but low conversion. In the former, you would look at ways to get noticed by your target group. In the latter, you’d want to understand barriers to purchase and overcome them.
You should also give consideration to the Shopper. The person who purchases the product isn’t always the end consumer. The consumer of dog food is the dog, and the shopper will typically be the dog owner. You need to be mindful of the influences on the shopper as well as the influences on the consumer.
By understanding your consumer and shopper you can seek to match your products and services to their needs in the most appropriate, and ideally differentiated way.
Competitor
In the same way, you need to understand all the nuances of your business you should do the same for your competitors. What is their offering? How are they positioning themselves? What is their market share? Do you know what their strategic priorities and focal areas are? What investments do you think they are making? Who has the greatest share of voice with the customers and consumers? and so forth.
Once you know your opponent you can consider your war game.
An initial, thorough, analysis could take as long as three months to compile but it will provide the comprehension and knowledge needed to formulate a strategic plan. Strategy at its most basic is just choice. Your strategic plan details the choices you have made and provides a framework for how you will operate.