chap015 evaluating mktg efforts

7/27/2019 Chap015 Evaluating Mktg Efforts

1/25

McGraw-Hill/Irwin Copyright 2009 by the McGraw-Hill Companies, Inc. All rights reserved.


2/25

Managing Programs

and Customers

Part Four


3/25

Part Four

Managing Programs and Customers

Chapter 15

Evaluating Marketing Efforts

Chapter 16

CustomerRetention and Maximization


4/25

Chapter 15

Evaluating

Marketing Efforts


5/25

THE PROCESS OF CONTROL

Measure

performance

Compare

performance

to standard

Replicate cause

of high

performance

Eliminate cause

of lowperformance

Exhibit 15-1

15-5


6/25

THE FUNCTIONS OF A MARKETING

CONTROL SYSTEM

MEASURES ACTUAL PERFORMANCE AGAINST PLANNED

PERFORMANCE

Sensor - The Measuring Tool

StandardThe Goal To Achieve

MEASURES PRODUCTIVITY AND PROFITS BY

Types Of Products

Customers

Territories

MEASURES KEY MARKETING VARIABLES: Customer Satisfaction

Advertising Efforts

Pricing Strategies

Distribution/Channel Activities

15-6


7/25

Measure whats important

THREE COMMON-SENSE

PRINCIPLES OF CONTROL

Assumptions and goals

determine measures

What gets measured

is what gets done

15-7


8/25

DIMENSIONS OF CONTROL

Micro Macro

Input Regional Sales Office Expense

Trade Show Budget

Product X Development Cost

Total Selling Expenses

Promotion Budget

Total R&D Budget

Output Regional Sales Office Revenue

Leads from Trade Shows

Sales for Product X

Total Revenue

Corporate Position

Total Division Revenue

Exhibit 15-2

15-8


9/25

Exhibit 15-3

INPUT

VARIABLES

Price

Product R&D

Advertising

PromotionDistribution

Marketing

Research

Marketing

Administration

SET

BY

BUDGET

ACTION

PHASE

THE

MARKETING

PROGRAM

MARKET

REACTION

THE

MARKET

OUTPUT

VARIABLES

Sales

Market Share

Profit

Communication

resultsDistribution

results

Buyer

attitudes

and

behavior

COMPARED TO

PERFORMANCE

STANDARDS

CONTROL OF INPUT AND OUTPUT VARIABLES

15-9


10/25

THE COMPONENTS MEASURED BY THE

BALANCED SCOREBOARD

FINANCIAL RESULTS

Net income

Profit margin

Return on investment

Return on assets managed

CUSTOMER RESULTS

Revenue per customer

Account share

Customer satisfaction

Intent to repurchase

INTERNAL BUSINESS

PROCESS

Employee satisfaction

Data availability

New product development

cycle

Credit approval cycle

LEARNING & GROWTH

MEASURES

Completed trainingprograms

New patents obtained

New products introduced

Exhibit 15-4

15-10


11/25

DEALING WITH VARIANCE IN OUTCOMES

FOUR CAUSES OF VARIANCE

CHANGES TO PROCESSCHANGES BY

RANDOM FACTORS

TINKERING VARIANCEMaking minor

adjustments

SYSTEMATIC SOURCES

Change systems tocreate new

measures

EXTERNAL CAUSESIdentified uncontrollable

causes, like the economy

RANDOM CAUSES

Both uncontrollable andunidentified causes; how

much can be attributed to

known cause

15-11


12/25

VARIANCEUNDERSTANDING THE CAUSES

Tinkering Variance: Improving the little things in an existing system/process

Systematic Variance:

Out with the old, in with the new

External Causes of Variance

The external environment provides all kinds ofchallenges beyond management control

Random Causes of Variance

Not only are there uncontrollable causes, there arevariables that cannot be identified. Things happen

15-12


13/25

Exhibit 15-5

TINKERING: Make changes within a sales territory to narrow the

range of variance

VARIANCE: HOW DO YOU NARROW THE DIFFERENCE

Jan Feb March April May June

0

100

125

150

175

200

Wilcox

Young

Zorn

Salesin$

000

15-13


14/25

0

100

125

150

175

Sales

in$

000

200

225

250

275

Jan Feb Mar Apr May June Jul Aug SepNew production introduction

VARIANCE: HOW DO YOU ADJUST PERFORMANCE

Systematic Change: Create new systems with a new range of performance standards

Each dot represents salesperson performance.

A new product brings higher levels of sales.

Exhibit 15-6

15-14


15/25

VARIANCE: HOW DO YOU ADJUST FOR

EXTERNAL ENVIRONMENTAL ACTIVITIES

Each dot is a salespersons performance. The range is due to seasonality of

customers purchases

External causes of variance: Create a response to changes caused by things beyond your control

Salesin$

000

0

100

125

150

175200

225

250

275

Jan Feb Mar Apr May June Jul Aug Sep Oct Nov Dec

Exhibit 15-7

15-15


16/25

BETTER PERFORMANCE:

OUTPUT AND INPUT TOOLS OF CONTROL

Standard

Setting Process Pros Con Comment

Benchmarking Can learn and

improve

Hard to find

someone willing to

let you benchmark

Can use

industry

associationmeasures

Quotas and

Targets

Easy to

establish

Can be difficult to

account for

variance

Consider

sources of

variance when

setting

Budgets and

Pricing Plans

Easy to

establish

Lack of flexibility

can lead to missed

opportunities

Create systems

for opportunity

evaluation

Exhibit 15-8

15-16


17/25

THREE TOOLS FOR BETTER CONTROL OF

SYSTEM PERFORMANCE

SET OUTPUT AND INPUT STANDARDS OfPerformance That Can Be Observed And Measured

DEVELOP MEASUREMENT TOOLS Such As MarketingAudits, Customer Satisfaction Measures And AccountingSystems

CREATE SEARCH TOOLS Such As Reporting SystemsAnd Information Systems To Find Variance And Its Causes

15-17


18/25

SUMMARY OF MEASUREMENT TOOLS

Exhibit 15-9

MeasurementTools Pro Con Comment Sources of Data

Marketing

Audits

Complete

process

review

Difficult

and time-

consuming

Most beneficial

when done

regularly but not

frequently

Observation and

survey in the

field by the

auditors

Customer

Satisfaction

Measurement

Can be a

predictor of

future sales

Challenge to

find what or

who caused

(dis)satisfac-

tion

Used as a

measure of

performance

Surveys of

customers,

including

decision makers

and users

AccountingSystems

Enablesallocation of

fixed costs

Hard to applyto specific

customers

Use a variety tounderstand

customer and

product

profitability

Transactionsystems such

as accounts

receivable,

shipping, and

manufacturing

15-18


19/25

KEYS TO THE MARKETING AUDIT

1. External Environment

2. Marketing Strategy

3. Level of Marketing Orientation

4. Marketing Systems and Processes

5. Marketing Functionality

6. Marketing Productivity

CONDUCTING AN EVALUATION OF A FIRMS

MARKETING ACTIVITIES AND ITS ENVIRONMENT

WILL INCLUDE REVIEWING ITS:

15-19


20/25

CRITICAL TO DECISION MAKING:

ALLOCATING COSTS

OBJECTIVE: INCREASE CONTROL OVER EXPENSESAND INCREASE PROFITS

Full Costing

To work best, must

allocate every cost to aspecific product/cost

center

Contribution Analysis

To work best, all

incremental costs have tobe identifiable and

allocatable

Activity-Based Cost

AccountingTo work best, all revenues

and expenses have to be

allocated to each activity

15-20


21/25

FULL COSTING ALLOCATION

Assume: Two sales teams, one with six members

and the other with nine; one sales office

supporting both teams

PRODUCT A PRODUCT B

Revenues $500 $800

Direct Costs 50 100

Overhead Costs

(say $150 divided 60/40) 60 90

Net Revenue $390 $610

15-21


22/25

CONTRIBUTION ANALYSISSales

OfficeA

Sales

OfficeB

Sales

OfficeC Total

Sales $350 $320 $380 $1,050

Less variable costs 170 160 175

Contribution margin $180 $160 $205

Fixed costs controllable by sales manager 53 52 54

Sales managers contribution margin $127 $108 $151

Fixed costs identified but not controlled by

sales manager 19 19 19

Sales office contribution $108 $ 89 $132 $328

Common costs $231

Income before taxes $ 97

Exhibit 15-12

15-22


23/25

COMPARING CONTRIBUTION AND ABC METHODS

Digital Wamometer Tricometer

Sales $545 $545

Less variable costs1 320 335

Contribution margin $225 $210

Contribution Method

Less fixed mfg. costs2 85 50 50 15

Less fixed selling costs3 30 25 25 20

Income using ABC $110 $185

Income using contribution $150 $135

1Includes sales commissions, direct costs of manufacturing and shipping

2Total fixed mfg. costs = $100, but allocated based on complexity in mfg. process

3Total fixed selling costs (administrative overhead and sales office expenses)

= $50, but allocated on the basis of digital wamometer requiring six calls to

every four for the tricometer using ABC

Exhibit 15-12 15-23


24/25

All of the aboveOften combined with

experimentation for

more powerful

decision-making

Can lead to

incremental,

rather than

innovative,

thinking

Can inform

forecasts, as well

as explain past

success

Statistical

Analysis

Marketing systems that

track source of sale

Used more

frequently with

CRM systems

Hard to control

for all potential

causes

Establishes

cause and effect

Experimentation

Interviews of people

involved

Look for

underlying

principles of success

or failure

Can be hard to

apply learning

to new

situations

Method of

organizational

learning

Case Analysis

Surveys, transaction

systems, and third-party

sources such as Dun &

Bradstreet

Increasing use of

data warehouses

lets managers access

data directly

Difficult to get

data into a

format

everyone can

use

Self-serve

reporting

Information

Systems

Salespeople, trade show

managers, other marketing

managers, as well as

transaction systems

Companies are

moving to real-time

systems like

dashboards

Can get

tradition-bound

Method of

informationsharing across

work-groups

Reporting

Systems

Sources of DataCommentConProSearch Tools

BETTER PERFORMANCE: SEARCH TOOLS FOR IDENTIFYING VARIANCE

Exhibit 15-1315-24


25/25

THE REALITY TREE PROCESS FOR DETERMINING

PROBLEMS: FOCUS ON OUTCOMES

Undesirable Effect:

Avg. 52 days, invoiceto payment

Undesirable Effect:

Accounts Receivable sends

Incorrect invoicePotential Cause:

Accounts Receivable

misprocesses invoices

Potential Cause:

Customers are slow

payers

Potential Cause:

Customers cant pay

Potential Cause:

Credit terms cause

slow pay

Core problem:

Information submitted is

incomplete or fragmented

Potential Cause:

Accounts Receivablereceives poor

information

Undesirable Effects:

Order-entry misrecords

terms of sales

Undesirable Effect:

Shipping generatesincorrect records

Exhibit 15-14

15-25

chap015 evaluating mktg efforts

Documents