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Marketing Performance & Profitability

Implement, monitor and control marketing dept. value add / efforts

Marketing Performance & Profitability

  1. 1. Marketing - Performance & Profitability Implement, monitor and control marketing dept. value add / efforts Anand Subramaniam
  2. 2. <ul><li>“There are two types of CEOs: Those who know that they don’t understand marketing and those who don’t know that they don’t understand marketing.” </li></ul><ul><ul><li>- Philip Kotler </li></ul></ul>
  3. 3. Highlights <ul><li>Marketing - Performance Overview </li></ul><ul><li>Marketing - Performance & Metrics </li></ul><ul><li>Measure Marketing Plan & Performance </li></ul>
  4. 4. Marketing - Performance Overview
  5. 5. Marketing Performance – Shareholder Value Marketing Performance Customer Satisfaction Financial Performance Share-holder Value
  6. 6. Marketing Strategies Strategies <ul><li>Market Share </li></ul><ul><li>Net marketing contribution of the penetration that must exceed current net marketing contribution </li></ul><ul><li>Variable / Fixed Cost </li></ul><ul><li>Lowering variable cost / unit & increase net profit </li></ul><ul><li>Distribution / Logistics </li></ul><ul><li>Selling Expenses </li></ul><ul><li>Market Demand </li></ul><ul><li>Attracting more customers & growing market demand & a way to grow the net profits of a business. </li></ul><ul><li>Revenue / Customer </li></ul><ul><li>Overall profit impact </li></ul><ul><li>Prices that can be attained </li></ul><ul><li>Increases in average cost / unit </li></ul>Marketing Productivity & Profitability Market Orientation (Behaviour)
  7. 7. Measuring Marketing Productivity Productivity Marketing metrics to assess marketing efforts Marketers are held accountable for their investments and have to justify marketing expenditures to senior management Marketing research can help address the need for accountability Marketing mix modeling to estimate causal relationships and how marketing activities affects outcomes
  8. 8. Marketing Metrics Metrics Can be used by brand managers to design marketing programs A set of measures that help org. to quantify, compare, and interpret marketing performance Relate to customer-level concerns such as their attitudes and behavior Can be used by senior managers to decide on financial / budget allocations Relate to brand-level concerns such as market share, relative price premium, or profitability
  9. 9. Marketing - Performance & Metrics
  10. 10. Marketing – Internal & External Performance <ul><li>Internal </li></ul><ul><li>Unit cost </li></ul><ul><li>ROI & ROE </li></ul><ul><li>Inventory turn </li></ul><ul><li>Sales / Employee </li></ul><ul><li>Overhead Expenses </li></ul><ul><li>Accounts receivable </li></ul><ul><li>Return on Sales </li></ul><ul><li>Asset Turnover </li></ul><ul><li>External </li></ul><ul><li>Market & Relative Share </li></ul><ul><li>Customer Satisfaction </li></ul><ul><li>Market & Sales Growth </li></ul><ul><li>Product / Service Quality </li></ul><ul><li>Product/ Brand awareness </li></ul><ul><li>Customer Retention & Acquisition </li></ul><ul><li>Relative price & quality </li></ul><ul><li>Market coverage </li></ul><ul><li>Product trials </li></ul>
  11. 11. Marketing – Internal Customers <ul><li>Top Management Oversight </li></ul><ul><li>Target Market Definition </li></ul><ul><li>Communications and Lead Generation </li></ul><ul><li>Customer Retention and Cross-Sell Strategies </li></ul><ul><li>Product Development and Positioning </li></ul><ul><li>Budgets </li></ul><ul><li>Pricing </li></ul><ul><li>Forecasting Revenue </li></ul><ul><li>Financial Value Added </li></ul><ul><li>Measuring Performance </li></ul><ul><li>Customer Equity </li></ul><ul><li>Brand Equity </li></ul>Sales Finance
  12. 12. Marketing Strategies to Improve Profitability Marketing Profitability = Net Marketing Contribution (NMC) NMC = Sales Revenue x % Gross Profit – Marketing Expense Net Market Contribution = Market Demand X Average Selling Price X Channel Discount - Marketing Budget Percent Margin X Marketing Share X Strategies to grow market demand Strategies to increase profit margin Strategies to increase avg. selling price Strategies to grow market share Strategies to lower channel cost Strategies to improve marketing Efficiency
  13. 13. Marketing – Financial Metrics Cost of Goods Sold (COGS) (% Sales) Marketing & Sales Expenses (% Sales) Overhead Expenses (% Sales) Return on Sales Return on Assets Return on Capital Asset Turnover Accounts Receivable (Days) Inventory (Days) Cost Metrics Profit Metrics Asset Metrics
  14. 14. Marketing – Metrics Customer Satisfaction Customer Retention Sales Growth Market Growth Market Share Relative Product Performance Relative Service Performance Relative Customer Value Customer Metrics Market Metrics Competitive Metrics
  15. 15. Marketing Return - Sales & Investment <ul><li>Return on Sales (ROS) </li></ul><ul><li>(useful for benchmarking) </li></ul><ul><li>NMC / Sales x 100% </li></ul><ul><ul><ul><li>OR </li></ul></ul></ul><ul><li>Gross Profit (% of Sales) – Marketing Expenses (% of Sales) </li></ul><ul><li>Return on Investment (ROI) </li></ul><ul><li>(used to assess productivity) </li></ul><ul><li>NMC / Marketing Expenses x 100% </li></ul><ul><ul><ul><li>OR </li></ul></ul></ul><ul><li>Marketing ROS / Marketing Expenses (% of Sales) </li></ul>
  16. 16. Measure Marketing Plan and Performance
  17. 17. Marketing Plan Performance Variance Analysis Financial / Profit Analysis Sales Analysis Market Share Analysis Market’g Expense to Sales Analysis
  18. 18. Sales Analysis <ul><li>Consists of measuring and evaluating actual sales in relation to goals </li></ul><ul><ul><li>Sales Variance Analysis = measures the relative contribution of different factors to a gap in sales performance </li></ul></ul><ul><ul><li>Micro-sales Analysis = measures specific products, territories etc that failed to produce expected sales </li></ul></ul>
  19. 19. Market Share Analysis <ul><li>To highlight performance relative to competitors where management needs to track market share. </li></ul><ul><ul><li>Overall Market Share = organisation’s sales expressed as a percentage of total market share </li></ul></ul><ul><ul><li>Served Market Share = expressed as a percentage of the total sales to its served market </li></ul></ul><ul><ul><li>Relative Market Share = expressed as market share in relation to its largest competitor </li></ul></ul>
  20. 20. Market Share Calculation <ul><li>Customer Penetration = percentage of all customers who buy from the organisation </li></ul><ul><li>Customer Loyalty = the purchases from the organisation by its customers expressed as a percentage of their total purchases from all suppliers of the same products </li></ul><ul><li>Customer Selectivity = the size of the average customer purchase from the organisation expressed as a percentage of the size of the average customer purchase from an average organisation </li></ul><ul><li>Price Selectivity = the average price charged by the organisation expressed as a percentage of the average price charged by all companies </li></ul>Overall Market Share = Customer Penetration X Customer Selectivity X Price Selectivity X Customer Loyalty
  21. 21. Marketing Expense-to-Sales Analysis <ul><li>Marketing Expense to Sales (ratio) </li></ul><ul><li>Period-to-period fluctuations in each ratio tracked on a control chart </li></ul><ul><li>Marketing expense to sales by time period with the desired level, upper and lower limits established </li></ul>
  22. 22. Financial / Profit Analysis <ul><li>Return on Net Worth = is the product of two ratios </li></ul><ul><ul><li>Return on assets </li></ul></ul><ul><ul><li>Financial leverage </li></ul></ul><ul><li>Return on Assets = is the product of two ratios </li></ul><ul><ul><li>Profit margin </li></ul></ul><ul><ul><li>Asset turnover </li></ul></ul>
  23. 23. Return on Net Worth
  24. 24. Profitability Analysis <ul><ul><li>Products </li></ul></ul><ul><ul><li>Territories </li></ul></ul><ul><ul><li>Customer groups </li></ul></ul><ul><ul><li>Segments </li></ul></ul><ul><ul><li>Trade channels </li></ul></ul><ul><ul><li>Order sizes </li></ul></ul><ul><li>To determine whether any products or marketing activities should be expanded, reduced or eliminated </li></ul>
  25. 25. Variance Analysis <ul><ul><li>Marketing Expense </li></ul></ul><ul><ul><li>Volume </li></ul></ul><ul><ul><li>Margin </li></ul></ul><ul><ul><li>Cost </li></ul></ul><ul><ul><li>Demand </li></ul></ul><ul><ul><li>Share </li></ul></ul><ul><ul><li>Price </li></ul></ul><ul><li>Compares actual with expected performance </li></ul><ul><li>Isolate components of marketing performance </li></ul>
  26. 26. Customer Performance Scorecard % of win-back customers to average # % of new customers to avg. # of customers % of target market members with brand recall % of lost customers to average # % of customers who would repurchase % of customers in various levels of satisfaction Scorecard # of customer won and lost in each market % of customers who say brand is most preferred
  27. 27. <ul><li>“ You know you're getting old when you stoop to tie your shoelaces and wonder what else you could do while you're down there .” </li></ul><ul><ul><li>- George Burns </li></ul></ul>
  28. 28. <ul><li>Good Luck </li></ul><ul><li> </li></ul>

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Implement, monitor and control marketing dept. value add / efforts


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