Ch. 11App: The Financial Impact The Financial Assessment Process

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Ch. 11App The Financial ImpactThe Financial
Assessment Process

• Budgetary considerations play a role in the
  identification, evaluation, and control of
  alternative marketing strategies.
• Top executives must be convinced that the
  marketing plan and strategy are a good value for
  the firm.
• The ratio of the plans costs compared to
  expected returns will be a deciding factor in
  determining which plans receive approval and
  funding.
• Performing a financial assessment of the
  marketing plan requires a working understanding
  of both finance and statistical analysis.

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Financial Assessment Tools (1 of 2)

• Contribution Analysis
• Attempts to determine the amount of output
  (revenues) that can be expected from a given set
  of inputs.
• The formula for contribution analysis
• Response Analysis
• Addresses the question of incremental change. The
  goal is to estimate accurate response
  coefficients that can be used to predict the
  change in sales volume based on a change in one
  or more elements of the marketing mix.

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Sales Response to Advertising Expenditures
Exhibit 11A.1
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Financial Assessment Tools (2 of 2)

• Systematic Planning Models
• Marketing managers often use a planning model to
  estimate the financial effects of marketing
  activities proposed in the marketing plan.
• The inclusion of a detailed planning model in the
  marketing plan can assist the marketing manager
  in convincing top executives that the
  implications of the proposed marketing plan have
  been considered carefully.

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Exhibit 11A.2
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Exhibit 11A.3