Strategic Planning Mnemonic
10 January 2010    Bob

Great concepts boiled down to their simplest form.

Every so often something learned in b-school should either be tattooed on the back of your hand or put into the more permanent regions of one's gray matter. I'm referring to the strategic mnemonic of:

      STP
      CCC
      PPPP

I'm continually awed when a client comes to me with a great new business concept or product idea. Their initial reaction is to focus on the stuff on the "P" line. Of course, it's the stuff that is the most tangible. Product - "hey, it looks like this, has these killer features, plus we can undercut the competition by 10 bucks!" The good news is that there is some outward looking perspective in the excitement. But what about the foundational elements that make sure that the product or service has a chance to succeed in the real world?

The bottom line is that every business plan needs to start at the top of the mnemonic and work its way down to the "P" line.

Now those who sat in on any of Bubba Z's classes at UT will know that there are no absolute guarantees in a non-monopolistic business. Understanding " clearly defining each element in this puzzle will give you better odds of success when compared against doing nothing.

Let"s review each part:

Segment:   Marketplaces are enormous. The automotive vehicle market has hundreds if not thousands of different segments; light trucks, SUVs, convertibles, compacts, to name a few. A market segment is a homogeneous group of consumers. It needs to be:

• measurable - one can only manage what you can measure
• accessible (by communication and distribution channels)
• responsive (to differing inputs or changes in the marketing mix)
• durable (not changing too quickly)
• substantial enough to be profitable

Target:   Simply stated, this is all about focus. Businesses need to select a segment to serve, just as Lexus has chosen to serve the luxury automotive market. Likewise, a product will be developed to serve a specific sub-market or niche.

Position:   From a classical perspective, this answers the question "how are we going to position the business or product in our selected market space?" This of course implies some sort of differentiation. Al Ries and Jack Trout in their book, Positioning: The Battle for your Mind explain that while positioning begins with a product, the concept really is about positioning that product in the mind of the customer.

Customers:   Who are the target customers? This includes not only the ones that pay for the product or service, but stakeholders as well. In the graphing calculator market, one in which I'm well acquainted, the non-paying customers include teachers, administrators, textbook publishers, and students. This assumes that parents, who don't even use the device are the ones who pay for it.

Competitors:   Who are your competitors? Competitors come in all shapes, sizes & colors, and many are not obvious. There are obvious competitors in the electronic calculator market: TI, Casio, Sharp, HP. However, a computer, a cell phone, an abacus, and a pen & paper are viable competitors when looking at serving a customer's need to make mathematical computations.

Competencies:   This is the first inwardly focused element in the matrix. It's what one [person or business] is good at doing. This is a relative term, and needs to be held in the context of the intended market segment. One may be an excellent chef [short order cook] at Denny's, but fall short when serving customers at Chez Panisse.

Product:   The product is the physical product or service offered to the consumer. In the case of physical products, it also refers to any services or conveniences that are part of the offering.

Price:   Pricing includes not only the list price, but also discounts, financing, and other options such as leasing. Don't forget to include any competitive responses to changes in price. Companies may vigorously defend their turf through aggressive price matching.

Placement:   Channels of distribution serve as the means for getting the product to the target customers. The distribution system performs transactional, logistical, and facilitating functions. Also include expected levels of service in any analysis.

Promotion:   This relates to communicating and selling the product or service to potential consumers. Since these costs can be large in proportion to the product price, a break-even analysis should be performed when making promotion decisions. It is useful to know the value of a customer in order to determine whether additional customers are worth the cost of acquiring them.

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