Marketing contingency planning is the process of preparing strategic actions that a company's management team can take when sales results deviate substantially from what had been forecasted. Companies that emphasise contingency planning are simply being realistic -- they recognise that the economic and competitive environment in which the company operates is constantly changing.
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Having contingency plans in place allows a company to react quickly to environmental changes and to not lose market shares as a result of competitors' actions. It enables the management team to address shortfalls in revenue or unexpected increases in expenses in time to minimise the effect on the company's profitability. Contingency plans help a business get the most out of unexpectedly good market conditions. A mortgage company that sees loan demand being unusually high in one region of the country will have contingency plans in place to quickly open additional sales offices and hire more loan officers.
A company must develop a system for collecting information about its competitors for contingency planning to be effective. Part of the process is deciding what actions competitors are most likely to take, but the company must also keep track of changes going on internally with competitors. Finding out a competitor has received an infusion of venture capital, for example, would be important information to have. The company predicts how the competitor will use the capital to improve its competitive position, such as stepping up its advertising campaign. A contingency plan will be developed to counter or dilute the effect of this advertising. Possible changes in the economic environment must be considered and contingency plans prepared. There are times when both consumers and businesses pull back on their spending, and companies who serve these markets must know how to react to a downturn.
Contingency planning requires the ability to think creatively and strategically, anticipating what can occur that will affect the company's sales performance. One way companies approach the process is termed "what if" scenarios. An example would be: What will our response be if our chief competitor cuts his prices by 20 per cent? The marketing team will have a strategic brainstorming sessions where as many of these scenarios as possible are written down, plans are made to address those and finally the team will judge which scenarios have the greatest chance of occurring.
Types of Contingency Plans
Tactical contingency planning means having plans in place to deal with the unexpected such as a new competitor entering the market. Plans are also made to address sales shortfalls, the first step to isolate the specific causes of the unsatisfactory results and determine how to allocate marketing resources to rebuild sales momentum. Companies may also prepare plans to cope with disasters that can happen such as power outages or bad weather delaying shipments such as hurricanes.
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