MEASURING MARKETING EFFICIENCES

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MEASURING MARKETING EFFICIENCES

• Dr. Metzner

EMGT451 2/2004
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Types of Marketing Controls

• STRATEGIC
• ANNUAL PLAN
• EFFICIENCY AND EFFECTIVENESS
• PROFITABILITY

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Strategic Marketing Control

• TOP MANAGEMENT INVOLVEMENT
• LONG TERM COMMITMENTS, MORE THAN 5 YEARS
• BROAD INITIATIVES
• MARKET AUDITS USED FOR CONTROL

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Annual Plan Control

• Usually Produces a Budget as a Spending Guide
• Involves Middle Managers
• Controlled through Variance Analysis

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Efficiency and Effectiveness Controls

• Used to Determine the Effectiveness of Different
  Groups
• Involves Lower Management
• Evaluates Tactics and Programs
• Uses Ratio Analysis

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Profitability Control

• Periodically applied
• Optimizes expenditures
• Related profitability to marketing tactics
• Profitability studies are a staff function
• Activity Based Costing analysis (ABC)

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The Control Process

• 1. Set Performance
• Standards

2. Specify and Obtain Feedback
3. Evaluate Feedback
4. Take Corrective Action
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The EE Control Process
STD
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Ratio AnalysisProduct

• Sales by market segments
• Sales relative to potential
• Sales growth rates
• Market share
• Contribution margin
• Percentage of total profits
• Return on investment

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Ratio AnalysisDistribution

• Sales, expenses and contribution by channel type
• Sales and contribution by intermediary type and
  individual intermediaries
• Sales relative to market potential by channel,
  intermediary type, and specific intermediaries
• Expense-to-sales ratio by channel, etc.
• Order cycle performance by channel, etc.
• Logistics cost by logistics activity by channel

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Ratio AnalysisCommunication

• Advertising effectiveness by type of media
• Actual audience/target audience ratio
• Cost per contact
• Number of calls, inquires, and information
  requests by type of media
• Dollar sales per sales call
• Sales per territory relative to potential
• Selling expenses to sales ratios
• New accounts per time period

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Ratio AnalysisPricing

• Price changes relative to sales volume
• Discount structure related to sales volume
• Bid strategy related to new contacts
• Margin structure related to marketing expenses
• General price policy related to sales volume
• Margins related to channel member performance

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Activity Based Costing Analysis

• Used To Analyze Activities For Efficiency And
  Effectiveness
• Relates Costs To Activities Producing Them
• Relates Activities To Profits Produced By Them
• Aids In Management Of Activities

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PROFIT AND LOSS STATEMENT

• NET SALES 17,000
• COST OF GOODS SOLD 11,900
• GROSS MARGIN 5,100
• PERIOD EXPENSES
• SALARIES 2,500
• RENT 500
• WRAPPING SUPPLIES 1,012
• STATIONERY AND STAMPS 50
• OFFICE EQUIPMENT 100
• 4,162
• NET PROFIT 938

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Spreading Natural Accounts to Functional Accounts

• FUNCTIONAL ACCOUNTS
• SALES PACK- ADVER-
  BILLING NATURAL ACCOUNTS AGING
  TISING COLLLECTION
• SALARIES . . . . . . . . . . . . . . . 2,500
  1,000 900 300 300
• RENT . . . . . . . . . . . . . . . . . . . . . .
  500 400 50
  50
• WRAPPING SUPPLIES . . . . . .1,012
  1,012
• STATIONERY AND
• STAMPS . . . . . . . . . . . .. . . .50
  25
  25
• OFFICE EQUIPMENT . . . . . . 100
  50 50
  
• 4,162 1,000 2,312
  425 425

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Cost Analysis for Products

• SELL- UNITS
  SALES
• ING SOLD
  VOLUME BULK PACKAG-
• PROD- COST/ PRICE IN IN
  PER ING
• UCTS UNIT /UNIT PERIOD PERIOD UNIT
  UNITS
• A 7 10 1,000
  10,000 1 1,000
• B 35 50 100
  5,000 3 300
• C 140 200 10
  2,000 6 60
• 1,110
  17,000 1,360

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Cost Analysis for Customers

• SALES ORDERS
  UNITS OF EACH
• CALLS PLACED PRODUCT
  ORDERED IN
• CUS- IN IN
  PERIOD
• TOMERS PERIOD PERIOD A B
  C
• SMITH 30 30
  900 30 0
• JONES 40 3
  90 30 3
• BROWN 30 1
  10 40 7
• 100 34
  1,000 100 10

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Functional Cost Account Allocations

• SALES CALLS 1,000/100 calls 10/call
• BILLING 425/34 orders
  12.50/order
• PACKAGING
• UNIT COSTS 2,312/1,360 packaging units
• 1.70/packaging unit
• 1.70/unit of Product A
• 5.10/unit of Product B
• 10.20/unit of Product C
• ADVERTISING 425/10 units of Product C
• 42.50/unit of Product C

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PROFIT AND LOSS STATEMENTS BY CUSTOMERS

• 
  SMITH JONES
  BROWN WHOLE COMPANY
• NET SALES
• A
  9,000
  900 100
• B
  1,500
  1,500 2,000
• C
  _____
  600 1,400
• TOTAL SALES
  10,500
  3,000 3,500 17,000
• COST OF GOODS SOLD
• A
  6,300
  630 70
• B
  1,050
  1,050 1,400
• C
  _____
  420 980
• TOTAL COST OF GOODS SOLD
  7,350 2,100
  2,450 11,900
• GROSS MARGIN
  3,150 900 1,050
  5,100
• PERIOD EXPENSES
• SALES CALLS ( 10 EACH)
  300 400.00
  300.00
• ORDER COSTS (12.50 EACH)
  375 37.50
  12.50
• PACKAGING COSTS
• A 1,530 153.00
  17.00
• B
  153
  153.00 204.00
• C
  
  30.60 71.40

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Reconciling Period Reports

• GROSS REVENUES 100
• Commissions -5
• Sales Taxes -7
• Discounts -2
• Allowances -2
• Damage -2
• Freight -10 -28
• NET SALES 72
• - COST OF GOODS SOLD
• NET MARGIN
• -PERIOD EXPENSES
• PROFIT BEFORE TAXES

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Engineering Management 451
Advanced Marketing Management
Final Exam