Smirnoff Ice Marketing Planning Process

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Abstract This paper aims to evaluate the marketing planning process for the case of Smirnoff Ice as a top selling Diageos brand at the Serbian marketplace. After a brief Company profile description and its business environment, the article proceeds to discuss and evaluate steps for a full analysis of the strategic marketing planning process assessing its importance with all related assumptions. Using the material collected after comprehensive research of the Smirnoff Ice market place and assessing the Smirnoff Ice Marketing Plan, the writer of this article tried to provide answers to the questions like: why is the marketing planning process an important tissue, who makes the strategic marketing decisions, what information are used in the strategic planning process, who sets objectives and marketing mix strategies etc. Finally, the paper offers the conclusions and recommendations by summarizing the article findings, highlighting most important topics discussed. Key words: marketing plan, marketing planning process, Smirnoff Ice, marketing mix :

1. Introduction Planning is an important process which exceeds its basic role as the tool for the business decision making. According to Drucker (1955), planning is concerned with development of strategies based on an organizations assessment of the marketplace and perceptions of managerial expectations and organizational capability. Marketing planning is an essential management process as it affects every aspect of organizational life. It considers logical structure of a series of activities in order to set organizations objectives and the definition of a plan for achieving them. Marketing planning is a continuous process. Marketplace conditions are under constant change, consumers are changing their needs, and competitors are always around looking for opportunity to capture a piece of market share. Any plan used in the past will not necessarily work in the future. Therefore, the marketing plan needs to be frequently changed adapting to the environment in which business operates. Marketing planning is also important as concerns budgets providing funds when required for different departments of an organization. Not only marketers and the marketing department deal with marketing planning is an organization, everyone is ultimately involved with marketing in some way. Marketing decisions correlate with overall objectives of an organization. They affect companys financials, as decisions cost. Only the successful marketing decisions will be of benefit to their organizations. Therefore marketing decisions need to be under constant measurement and control by firms executives through continuous process of marketing planning. Strategic marketing planning, after Drucker (1974), is an important process that must be followed by every organization to guide its decision makers to set priorities for operational change promoting and improving a firms performance. The goals of strategic marketing management, as stated by Wysocki and Wirth (2005) are to select reality-based desired accomplishments (goals and objectives), to more effectively develop or alter business strategies, to set priorities for operational change and finally, to improve a companys performance. This paper will focus specifically on the development of the marketing planning process for the brand Smirnoff. A short company introduction will be followed by evaluation of the factors that influence development and implementation of the marketing planning. Finally, a proposal for a change followed with conclusions for further improvement will be highlighted. 2. Company Illustrative

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Smirnoff Ice Marketing Planning Process

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Diageo plc is a global company operating in over 180 markets around the world. Being focused on premium drinks, the Company operates across the total beverage alcohol sector, owning nine of the worlds top 20 premium spirits, ready-to-drink (RTD), wine and beer brands. Diageo distributes its brands under the geographic organization that comprises North America, Europe and International markets. The European distribution is organized through a network of a number of Strategic Business Units (SBU) across the continent. Strategic Business Unit out of Greece, Diageo Hellenic, is responsible for maintaining distribution of all Diageo brands on the regional level for Southern and Eastern Europe (SEE). Part of Diageos overall strategy is to work more closely with companies using a network of consulting and distribution firms in different countries. Di Line, Serbia is exclusive distributor of all Diageo brands for the Serbian marketplace. Di Line maintains and expands an existing distribution network at the same time being supported by Diageo portfolio as the world's leading premium drinks. 3. Marketing Planning Process Di Line is under direct supervision of Diageo Hellenic, while Diageo Hellenics principal is the Head Office, out of UK. The UK headquarter is responsible for the worldwide corporative coordination. All corporative-wide strategies and objectives, long-term planning including strategic marketing planning are under direct responsibility of Diageo's Board of Directors. The day-to-day running of Diageo is delegated by the board to the CEO. The CEO is assisted in his decision making by Diageo's executive committee, the most senior leadership team. These top executives define the Companys mission statement: We want Diego to be a customer-focused, profitable distributor of beverage alcohol, dedicated to innovation, exemplary service, social responsibility and helpful product knowledge. Mission Statement is the starting point for both corporate and strategic marketing planning as it provides all employees within organization with a clear understanding of core corporative values. According to Wensley (1987) it shall be short on numbers and long on rhetoric while (still) remaining succinct. As stated by Campbell et al. (1990), to be worthwhile, it is essential for a mission statement to be realistic and specify the businesses boundary in which the company operates. Many organizations lack a clearly defined mission. Others have a statement but it reflects a degree of wishful thinking rather than reality. As claimed by Levitt (1975), organizations and their senior executives very often have gotten themselves in a crucial mistake of their business existence. They fail to understand exactly what business they are in, focusing on the products which their company produces and not on the customer needs they serve. Not recognizing what business they are really and truly in, Levitt defines as the term of marketing myopia. His article exhorted companies to redefine their markets in term of wider perspectives and re-examine their corporate vision. The Greece SBU, Diageo Hellenic, is under the leading role of the General Manager that coordinates activities of the Marketing Director, Trade Marketing Manager, Brand Manager and all other associates employed within the SBU. These top executives set a vision by following the corporate strategy down to all employees: Our vision for our business is based on a set of simple and clearly-stated values. These describe and guide our actions and ensure that, by acting with integrity and responsibility, we can achieve continuing success. Diageo Hellenic objectives are set in form of marketing goals contained within tactical marketing plan for distributors of Diageo brands across South East Europe (SEE). It is set for the time span of three years, although it could be converted into a detailed one year plan. The Serbian distributor, Di Line is responsible for undertaking specific actions to achieve a set of goals for all Diageo brands, including Smirnoff Ice as a brand to be considered by this paper, through the year and day-to-day operations. The firm is without traditional marketing department. Di Line employs only a few individuals under the leadership of the Marketing Manager. The Marketing Manager is responsible for all Diageo brands and prepares an Operational Marketing Plan for each brand, the Commercial Plan (Sales) and
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Smirnoff Ice Marketing Planning Process

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Annual Trade Strategy e.g. budgets for various marketing channels. Marketing Plan is prepared annually for every brand individually using the lessons learned from the previous year to provide better directions for future marketing efforts. Although the plan reflects the needs of the Serbian market, its layout is slightly different from the traditional marketing plan format. As a part of Diageos overall marketing strategy, all SBUs worldwide are requested to follow the same format called Game Plan where GAME stands for the acronym: Goal, Activities, Measurement and Evaluate. However, most of the topics from the traditional marketing plan are contained including advertising budget for new initiatives. For more details, please refer to Appendix 1. Advertising budgets are prepared by the Marketing Manager as a request for the funds to be approved by Diageo Hellenic. They are determined by percentages of forecasted sales for a particular brand. For example, a nine-liter case of Smirnoff Ice i.e. one carton box sold is equivalent to the budget allowance of 15 Euros. Every box contains 24 units of 275 ml bottles of Smirnoff Ice. This is a good approach where advertising budgets could be viewed as a generator of future sales. The operational marketing plan shall be issued to Diageo Hellenic not later than end of June since Diageos fiscal year considers the period from July 1st to June 30th. Smirnoff Ice was introduced into the Serbian RTD market only a few years ago. Marketing Strategy for Smirnoff Ice as a product falls into a category of market share growth that could be achieved by taking sales away from competitors Gilligan and Wilson (2003). The strategy looks to introduce growth in sales also with new products as an extension to the exiting Smirnoff Ice product that can quickly build awareness of these RTD extensions within existing and potential consumers. The marketing research is outsourced to Synovate, Serbia as a third party research provider. Synovate collects information, processes the data, and produces and analyzes results by using the statistical methods in order to explore market potential and track consumer attitudes. This is a good approach as the local agencies speak the language, understand the culture and business climate, and are more familiar with the competitive landscape. The research is based on Diageos specifically designed questionnaire consisting of nearly 120 different kinds of questions designed for every brand. Marketing research helps marketers to make less risky marketing decisions when considering the marketed segments and see how customers are satisfied with firms efforts. After Kepner (2001), many companies do not spend enough efforts to collect and prepare the background section of the Marketing Plan. With proper marketing research a firm can make realistic objectives measured through net profit increase. Diageo Hellenic prepares the situation analysis on the SEE level. Di Line is not required to provide PEST analysis of factors affecting the RTD industry in the Serbian marketplace. Although the Smirnoff Ice marketing plan provides information on competition, the plan does not conduct an internal analysis of strengths and weaknesses (SWOT). This is a serious lasher since the results from the internal analysis, according to Hoffman et al. (2005), formulate firms market position and potential marketing strategies. Applying the concept of Product Life Cycle, and considering product sales increase in the Serbian market over the year (40%), Smirnoff Ice could be positioned as a product at the early growth stage. The marketing mix for Smirnoff Ice is divided up into the four parts: product, price, place and promotion. Through the premium drinks industry, RTD brands were viewed as a way to cross the gap between spirits and beers. Smirnoff Ice is a premium pre-mixed product that contains vodka, with 5% alcohol by volume. It seeks young, non-conformist, always-looking-for-something-new consumers both men and women between the ages of 1824-years-old. Its a social drink that people would have when having a good time promoting an idea: We are going to a party & we have to get Smirnoff Ice. The product comes in 275 ml clear glass bottles with a famous red Smirnoff label where the standard red Vodka logo is replaced by the word Ice. Life cycles in the RTD sector are relatively short. At the same time, there are plenty of imitators waiting for an opportunity to capture a piece of market share. The main advantage of Smirnoff Ice is the integrity of the parent Smirnoff brand name where imitators do not have this
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Smirnoff Ice Marketing Planning Process

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to rely on. Diageo promotes the product strategy: be good enough for second buying. New products are being sold to the same customer group in order to make a full use of the market to maximize sales. Cohn (2007) says: Stop wasting your time with strategies and ploys that will never work. He states that this is a big mistake that many companies make, spending too much time and effort finding new customers. With regard to the pricing strategy, the selling price remains the same especially due to strong market demand. The price is equal with the price of the main competitor, Bacardi Breezer, putting quality of these two brands in parallel with no intention to change value-based pricing strategy to attract consumers. Low prices can give negative image of low brand quality. Di Line uses discounting strategy to encourage bulk orders to wholesalers to place orders during off-summer periods. Smirnoff Ice promotions try to create awareness of the product and knowledge about the product through campaigns that show that it has the best taste. Di Line uses the pull promotion strategy to create the want for Smirnoff Ice which in turn creates a demand on the wholesalers and retailers and vice versa. It promotes the product and the bottles to become a fashion brand rather than a drink, at the same time being fun, stylish and humorous taking advantage of the growing fashionability of RTD products. Di Line also uses a multi-channel strategy promoting brand awareness among the chosen target groups in sales outlets. According to Clarke (2007) such a process creates strategies, processes, services and offers that align consumer activities and retailers capabilities but also requires different tailor-made marketing mixes for each channel. The Smirnoff Ice promotional mix is the combination of personal selling, advertising through print mediums, brand trials, sales promotion at the bars and clubs, in-store POP displays, flyers and posters distribution at places where the young hang out etc. Di Line also promotes the product over the Internet where Smirnoff Ice has a dedicated website (www.smirnoffice.com) with a strong clubbing theme. However, advertising of all alcoholic drinks is restricted on TV and radio programs by government rules. Marketing strategies can be easily changed on a periodic basis like price, packaging and product mix. However, once determined, distribution decisions are much difficult to change as they affect utilization of many other marketing tools. Smirnoff Ice and all other Diageos RTDs are bottled in Santa Vittoria, Italy. Upstream distribution for the region of SEE is coordinated by Diageo Hellenic. Downstream distribution for the Serbian market is under responsibility of Di Line and its local distributors to the wholesalers, distribution centers and retailer outlets. 4. Recommendations Different consumers have different demands. To stay interesting in the long run, the Company needs to consistently re-invent the brand by launching new variants as extension to Smirnoff Ice to obtain benefits in the taste and size. The marketing mix shall be refined on a frequent basis to meet the changing needs of the target group. The plan does not clearly identify barriers of the unstable Serbian marketplace. Most external forces are beyond the direct control of the marketers and as such shall be constantly monitored and responded to when necessary to better predict changes and respond well in advance of a change. The key to dealing with external forces is to engage in continual market research. There is an absence in creative marketing as the system set by Diageo Hellenic is too rigid. The interviewed Di Line representative said that there is too much interference of Diageo Hellenic executives who approve the plan and then insist on constantly making adjustments. According to Gooze and Harms (2007), constant meddling only distorts results and demoralizes the people in charge of driving the campaign. It would be better to wait until the results after marketing plan implementation are measured and then fine-tune the plan. Considering the product life cycle, almost every product will at some point arrive in the decline phase. In the case of RTD product this is much faster and more extreme due to a fact that RTD customers matured very fast having the target niche very narrow. There is a possible threat, as argued by Gardner (2004), that the generation of drinkers that made the ready-to-drink market is now turning to the ever popular beer and spirits. Thus the campaign shall be expanded to aim at 18- to-34-years-old customers.
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Di Line does not pay too much attention to Porters Five Forces analysis to assess the strength of each of the five forces in the RTD industry. Wysocki and Wirth (2005) state that such an analysis improves the firms chosen strategies establishing the clear areas of competitive advantage and disadvantage, respectively. Di Line should also take much care of self-analysis. According to Peterson (2001) such analysis seeks to provide internal strengths and weaknesses as well as strategic problems and constraints that a firm could bring to the strategic marketing management process. Moreover, Di Line should conduct a more detailed competitors analysis to identify how competitors products are sold, examine costs of their channels etc. As stated by Jackson et al. (2000) the alcohol industrys response to these trends has been to design alcoholic beverages that appeal to young people, using well-informed and precisely targeted marketing strategies. It is true that net profit and consumer satisfaction make emphasis on delivering better value for Diageo. However, a key piece in its marketing strategy should be more social responsibility (Cooke et al., 2002) through responsible drinking campaigns as alcohol consumption among young adults has aroused considerable concerns. (Institute of Alcohol Studies, 1999; Alcohol Concern, 1998). When considering a promotion strategy, Di Line may introduce integrated marketing communications (IMC) so the consumer receives a unified and consistent message about the brand. Di Line should use more the advantage of Central European Free Trade Agreement (CEFTA) to expand its trade in the region. Finally, a more frequent and rigorous control procedure shall be met by Di Line to measure and evaluate the achieved results and plan performance in order to take corrective actions pursuing firms best opportunities in gaining the Serbian market share. 5. Conclusion This paper has evaluated the marketing planning process of a brand as an important issue that considers the overall growth of the Company. Everything should start with a good marketing plan. It should be prepared first to be used as a base for all other firms departments. A brief introduction to the company was followed by an evaluation of the strategic marketing planning process within Diageo group. Diageos mission is clear and provides corporative guidance for many geographically scattered SBUs towards the Diageos goals. The paper further discusses brands marketing objectives, marketing research and marketing mix as a tool to assist the marketing strategy. Gooze and Harms (2007) say that many businesses start thinking about marketing planning only after sales have begun to sag. The key for successful marketing is in constant measurement of results retrieved from marketing research. These results need to be analyzed and shared throughout the whole organization as they consider their budgets. Only if all the aspects of the marketing mix are regularly monitored and changed as needed, the company would stay on the top of all possible threats.

References Alcohol Concern (1997). Young People and Alcohol - Information Unit Factsheet. Retrieved on May 16, 2007 from the Website www.alcoholconcern.org.uk Campbell, A., Divine, M. and Young, D. (1990). A Sense of Mission, London: Pitman/Financial Times. Retrieved on April 11, 2007 from the EBSCO database. Clarke, K. (2007). Multi-channel strategy. Retrieved on April 11, 2007 from the Website: http://www.retailforward.com/consulting/services.asp Cohn, T. (2007). Power Marketing Communication. Retrieved on May 16, 2007 from the Website: http://www.marketingprinciples.com/articles.asp?cat=448 Cooke, E., Hastings, G. and Anderson, S (2002). Social responsibility in the alcohol industry: Actions speak louder than words. Global Policy Alcohol Alliance. Issue 2. Retrieved on May 16, 2007 from the Website: http://edis.ifas.ufl.edu
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Diego Annual Report (2005). Diego Annual Report 2005. Retrieved on May 16, 2007 from the Website: www.diageo.com/ Drucker, P.F. (1955). The Practice of Management, London: Heinemann. Drucker, P. F. (1974). Management, Tasks, Responsibilities, and Practices. New York, NY: Harper and Row. Gardner, R. (2004). Diageo holds pitch for Smirnoff Ice business. Campaign (UK); 8/13/2004 Issue 33, p4-4, 1/5p, 1c. Retrieved on April 11, 2007 from the EBSCO database. Gilligan, C. and Wilson, R.M.S. (2003). Strategic Marketing Planning. Oxford, Linacre House, Jordan Hill, Gooze, M. and Harms, J. (2007). Best Practices: Marketing Strategy. Retrieved on May 16, 2007 from the Website: http://www/bestpractices/marketing_strategy.asp Hoffman, D. et al. (2005). Marketing principles and best practices. 3rd edition. Mason, Southwestern Institute of Alcohol Studies (1999). Alcohol and Young People - Factsheet. Retrieved on May 16, 2007 from the Website: www.ias.org.uk Jackson MC, Hastings GB, Wheeler C, Eadie DR and MacKintosh AM (2000). Marketing of alcohol to young people: Implications for industry regulation and research policy. Addiction, 95(Supplement 4): p. 597-S608. Kepner, K.W. (2001). Presentations made to extension audiences by this Distinguished Professor representing the University of Florida 1975-2001. Retrieved on April 11, 2007 from the EBSCO database. Levitt, T. (1960). Marketing myopia. Harvard Business Review, 38 (J-A), p. 24-47. Retrieved on April 11, 2007 from the EBSCO database. Peterson, H. C. (2001). Class presentations made to students at Michigan State University, 1992-2001. Retrieved on May 16, 2007 from the Website: http://edis.ifas.ufl.edu/FE299 Sanoo, S. (2006). Diageo shakes up industry with biggest launch since Smirnoff Ice. Marketing Week (01419285); 3/2/2006, Vol. 29 Issue 9, p5-5, 1/2p. Retrieved on April 11, 2007 from the EBSCO database. Wensley, J.R.C. (1987). Marketing strategy, in Baker, M.J. (ed.), The Marketing Book, London: Heinemann. p. 31. Wysocki, A.F and Wirth, F.F. (2005). Strategic Marketing Management: Building a Foundation for Your Future. Retrieved on May 16, 2007 from the Website: http://edis.ifas.ufl.edu

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