Chap015 evaluating market effort


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Chap015 evaluating market effort

  1. 1. McGraw-Hill/Irwin Copyright © 2009 by the McGraw-Hill Companies, Inc. All rights reserved.
  2. 2. Part FourManaging Programs and Customers
  3. 3. Part Four Managing Programs and Customers• Chapter 15 • Evaluating Marketing Efforts• Chapter 16 • Customer Retention and Maximization
  4. 4. Chapter 15 EvaluatingMarketing Efforts
  5. 5. THE PROCESS OF CONTROL Replicate cause of high e performance Abov d? r Compare St anda Measure performanceperformance to standard Below Stan Eliminate cause dard ? of low performance Exhibit 15-1 15-5
  6. 6. THE FUNCTIONS OF A MARKETING CONTROL SYSTEM• MEASURES ACTUAL PERFORMANCE AGAINST PLANNED PERFORMANCE • Sensor - The Measuring Tool • Standard – The 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. 7. THREE COMMON-SENSEPRINCIPLES OF CONTROL Measure what’s important Assumptions and goals determine measures What gets measured is what gets done 15-7
  8. 8. DIMENSIONS OF CONTROL Micro MacroInput Regional Sales Office Expense Total Selling Expenses Trade Show Budget Promotion Budget Product X Development Cost Total R&D BudgetOutput Regional Sales Office Revenue Total Revenue Leads from Trade Shows Corporate Position Sales for Product X Total Division Revenue Exhibit 15-2 15-8
  9. 9. CONTROL OF INPUT AND OUTPUT VARIABLES INPUT ACTION MARKET OUTPUT VARIABLES PHASE REACTION VARIABLES SalesPrice Market ShareProduct R&D ProfitAdvertising Communication THE THEPromotion results MARKETING MARKETDistribution PROGRAM DistributionMarketing results Research BuyerMarketing attitudes Administration and behavior SET COMPARED TO BY PERFORMANCE BUDGET STANDARDS Exhibit 15-3 15-9
  10. 10. THE COMPONENTS MEASURED BY THE BALANCED SCOREBOARDFINANCIAL RESULTS CUSTOMER RESULTSNet income Revenue per customerProfit margin Account shareReturn on investment Customer satisfactionReturn on assets managed Intent to repurchaseINTERNAL BUSINESS LEARNING & GROWTHPROCESS MEASURESEmployee satisfaction Completed trainingData availability programsNew product development New patents obtainedcycle New products introducedCredit approval cycle Exhibit 15-4 15-10
  11. 11. DEALING WITH VARIANCE IN OUTCOMES FOUR CAUSES OF VARIANCE CHANGES BY CHANGES TO PROCESS RANDOM FACTORS• TINKERING VARIANCE • EXTERNAL CAUSES Making minor Identified uncontrollable adjustments causes, like the economy• SYSTEMATIC SOURCES • RANDOM CAUSES Change systems to Both uncontrollable and create new unidentified causes; how measures much can be attributed to known cause 15-11
  12. 12. VARIANCE – UNDERSTANDING 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 of challenges beyond management control• Random Causes of Variance • Not only are there uncontrollable causes, there are variables that cannot be identified. Things happen 15-12
  13. 13. VARIANCE: HOW DO YOU NARROW THE DIFFERENCE Wilcox 200 Young 175 ZornSales in $000 150 125 100 0 Jan Feb March April May June TINKERING: Make changes within a sales territory to narrow the range of variance Exhibit 15-5 15-13
  14. 14. VARIANCE: HOW DO YOU ADJUST PERFORMANCE Each dot represents salesperson performance. A new product brings higher levels of sales. 275 250Sales in $000 225 200 175 150 125 100 0 Jan Feb Mar Apr May June Jul Aug Sep New production introductionSystematic Change: Create new systems with a new range of performance standards Exhibit 15-6 15-14
  15. 15. VARIANCE: HOW DO YOU ADJUST FOR EXTERNAL ENVIRONMENTAL ACTIVITIES Each dot is a salesperson’s performance. The range is due to seasonality of customers’ purchases 275 250 225 Sales in $000 200 175 150 125 100 0 Jan Feb Mar Apr May June Jul Aug Sep Oct Nov DecExternal causes of variance: Create a response to changes caused by things beyond your control Exhibit 15-7 15-15
  16. 16. BETTER PERFORMANCE: OUTPUT AND INPUT TOOLS OF CONTROLStandardSetting Process Pros Con CommentBenchmarking Can learn and Hard to find Can use improve someone willing to industry let you benchmark association measuresQuotas and Easy to Can be difficult to ConsiderTargets establish account for sources of variance variance when settingBudgets and Easy to Lack of flexibility Create systemsPricing Plans establish can lead to missed for opportunity opportunities evaluation Exhibit 15-8 15-16
  17. 17. THREE TOOLS FOR BETTER CONTROL OF SYSTEM PERFORMANCE• SET OUTPUT AND INPUT STANDARDS Of Performance That Can Be Observed And Measured• DEVELOP MEASUREMENT TOOLS Such As Marketing Audits, Customer Satisfaction Measures And Accounting Systems• CREATE SEARCH TOOLS Such As Reporting Systems And Information Systems To Find Variance And Its Causes 15-17
  18. 18. SUMMARY OF MEASUREMENT TOOLSMeasurement Tools Pro Con Comment Sources of DataMarketing Complete Difficult Most beneficial Observation andAudits process and time- when done survey in the review consuming regularly but not field by the frequently auditorsCustomer Can be a Challenge to Used as a Surveys ofSatisfaction predictor of find what or measure of customers,Measurement future sales performance including who caused decision makers (dis)satisfac- and users tionAccounting Enables Hard to apply Use a variety to TransactionSystems allocation of to specific understand systems such as fixed costs customers customer and accounts product receivable, profitability shipping, and manufacturing Exhibit 15-9 15-18
  19. 19. KEYS TO THE MARKETING AUDIT CONDUCTING AN EVALUATION OF A FIRM’SMARKETING ACTIVITIES AND ITS ENVIRONMENT WILL INCLUDE REVIEWING ITS:1. External Environment2. Marketing Strategy3. Level of Marketing Orientation4. Marketing Systems and Processes5. Marketing Functionality6. Marketing Productivity 15-19
  20. 20. CRITICAL TO DECISION MAKING: ALLOCATING COSTSOBJECTIVE: INCREASE CONTROL OVER EXPENSES AND INCREASE PROFITS Full Costing Contribution Analysis To work best, must To work best, all allocate every cost to a incremental costs have to specific product/cost be identifiable and center allocatable Activity-Based Cost Accounting To work best, all revenues and expenses have to be allocated to each activity 15-20
  21. 21. FULL COSTING ALLOCATIONAssume: Two sales teams, one with six members and the other with nine; one sales office supporting both teams PRODUCT A PRODUCT BRevenues $500 $800Direct Costs 50 100Overhead Costs(say $150 divided 60/40) 60 90 Net Revenue $390 $610 15-21
  22. 22. CONTRIBUTION ANALYSIS Sales Sales Sales Office Office Office A B C TotalSales $350 $320 $380 $1,050Less variable costs 170 160 175Contribution margin $180 $160 $205Fixed costs controllable by sales manager 53 52 54Sales manager’s contribution margin $127 $108 $151Fixed costs identified but not controlled bysales manager 19 19 19Sales office contribution $108 $ 89 $132 $328Common costs $231Income before taxes $ 97 Exhibit 15-12 15-22
  23. 23. 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 $1351 Includes sales commissions, direct costs of manufacturing and shipping2 Total fixed mfg. costs = $100, but allocated based on complexity in mfg. process3 Total 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. 24. BETTER PERFORMANCE: SEARCH TOOLS FOR IDENTIFYING VARIANCE Search Tools Pro Con Comment Sources of Data Reporting Method of Can get Companies are Salespeople, trade show Systems information tradition- moving to real-time managers, other marketing sharing across bound systems like managers, as well as work-groups dashboards transaction systems Information Self-serve Difficult to get Increasing use of Surveys, transaction Systems reporting data into a data warehouses systems, and third-party format lets managers access sources such as Dun & everyone can data directly Bradstreet use Case Analysis Method of Can be hard to Look for Interviews of people organizational apply learning underlying involved learning to new principles of success situations or failure Experimentation Establishes Hard to control Used more Marketing systems that cause and effect for all potential frequently with track source of sale causes CRM systems Statistical Can inform Can lead to Often combined with All of the above Analysis forecasts, as incremental, experimentation for well as explain rather than more powerful past success innovative, decision-making thinking Exhibit 15-13 15-24
  25. 25. THE REALITY TREE PROCESS FOR DETERMINING PROBLEMS: FOCUS ON OUTCOMES Undesirable Effect: Avg. 52 days, invoice to payment Undesirable Effect: Potential Cause: Accounts Receivable sends Customers are slow Incorrect invoice payers Potential Cause: Accounts Receivable Potential Cause: misprocesses invoices Accounts Receivable receives poor information Potential Cause: Credit terms cause Potential Cause: slow pay Customers can’t pay Undesirable Effects: Order-entry misrecords Undesirable Effect: terms of sales Shipping generates incorrect records Core problem: Information submitted is incomplete or fragmented Exhibit 15-14 15-25