Marketing Planning Process

LEGO’s approach to marketing is that of a top-down planning process.  In top-down planning, the marketing plans are formulated by either senior or middle management with the aid of staff and product management and then implemented by the later.  In LEGO’s case, the marketing direction typically would come from the global headquarters to determine what each brand’s goals are for the season or year.  Brand could either block competition, replace other high-performing themes (called big bangs), or simply continue throughout multiple years.  From the direction given by global headquarters, the next step is for each BU (business unit) to tailor it towards their specific consumers in an appropriate manner.  For instance, the Americas BU will be different than the European BU as children in Germany prefer to build products with more engineering capabilities than American children who prefer to build something than they’ve seen within a movie or TV show. 

In order for LEGO to continuously improve their marketing efforts, they have a planning process in place.  As we’ve read, the marketing planning process involves 8 steps:  (1) update the facts about the past; (2) collect background data; (3) analyze historical and background data; (4) develop objectives, strategies, and action programs; (5) develop pro forma financial statements; (6) negotiate; (7) measure progress; and (8) audit. 

To walkthrough how LEGO incorporates these 8 steps, I will give an example of one theme.  How would LEGO create a marketing plan for our Hero Factory line through the lens of the 8 step process?  In order to determine how to accurately plan for 2013 marketing, we need to understand how the theme performed in 2012, 2011, etc.  How did Hero Factory perform overall, within particular accounts, did we use new marketing techniques that would drive sales or did we anniversarize the same promo levers?  These are all questions that need to be answered.   Collecting background data involves understanding if the items within the Hero Factory theme bring the same uniqueness as previous years or if the content behind the property is something on a larger scale then in the past.  Steps 1 and 2 would then be combined to determine what the base is (step 1) and what is changing to create an increase or decrease in the proposal plan (step 2).  Now that we have the sales/marketing activity from previous years we must analyze and fully understand the information.  Step 3 would bring to light if there were any competitors that limited sales in previous years or economic conditions that would have prevented consumer demand.  For instance, if Hero Factory’s main competitor launched a major campaign with TV support in 2012 but is not in 2013, perhaps Hero Factory’s plan should increase knowing there is less of a risk of competition.  Another perspective LEGO takes in is the economic factor.  For example, did a government budget cut or tax increases affect the consumer’s shopping behavior? 

Once the analytics and background data is updated, it is now time to approach step 4 which is to develop objectives, strategies, and action programs.  This step involves setting objectives for the Hero Factory theme, developing strategies and promotions within the accounts in order to meet the Hero Factory objectives, compare the level of promotional support within each account to determine if they are adequate enough to hit the theme’s targets, and setting realistic goals for this particular theme.  Hero Factory will not produce the same sales volume that a big bang theme does, so we wouldn’t want to produce a marketing plan similar to that of a big bang.  The next step in the marketing plan process is to develop a budget in order to execute your proposed plan.  The brand manager would present their information to the Marketing VP in order to be allocated the necessary funds to execute promotions on TV, magazines, and secure off-shelf features within specific accounts.  The negotiation step would involve a collaborative discussion involving the brand manager, a member from the operations department to determine if what our theme forecast should be, and a member from the sales department to see if we can secure promotional features within the particular account.  This might involve some pushback as the sales member may think the operation’s forecast is too high or low within their respective account, or marketing would need to increase their budget so the account can secure the necessary promotional vehicles to make sure Hero Factory hits plan.

Once the prep work is complete we now have to see how well our marketing plan is performing.  Step 7 is to measure our progress and this is done at LEGO by researching NPS data.  This, on a scale of 0-100, will rank how well the theme is received by consumers on a number of different levels.  Also within step 7, the brand manager can work with their operations counterpart to raise or lower Hero Factory’s forecast based on performance and reviews.  Lastly, the marketing department would audit how Hero Factory performance is tracking and how the marketing budget was spent.  If it seems to be working, this data will be inputted into steps 3 and 4 in the following year so we can continue to improve the marketing planning process.

Simulation Reaction:

It was very interesting to see how my actions affected my stock price as I moved from period to period.  I was not expecting such drastic changes as my work experience is only with a private organization and we do not need to answer to public interests in order to provide shareholder returns.  I saw the influence promotions have on sales in both the short and long term.  Promotions boost sales in the short term, but erode margin and are not long lasting.  In order to be compelling, the advertising needs to change across periods to block competition and keep consumer demand relevant.  Additionally, price needed to increase over time to allow the margin necessary to advertise and run promotional activity.  It seemed to negatively affect the business when I kept prices low as my other costs rose.  As I continue to run simulations, the more comfortable I’ll understand what the consequences of some decisions are as well as what the best tradeoffs are in order to operate within my budget.