MKW2431: Lecture Eleven

Business Marketing Performance Measurement

COMMONWEALTH OF AUSTRALIA Copyright Regulations 1969 WARNING This material has been reproduced and communicated to you by or on behalf of Monash University pursuant to Part VB of the Copyright Act 1968 (the Act). The material in this communication may be subject to copyright under the Act. Any further reproduction or communication of this material by you may be the subject of copyright protection under the Act. Do not remove this notice.

Department of Marketing

Learning Objectives
After completion of this module, you will be able to: understand the functions and significance of marketing control in business marketing management describe the components of the control process grasp the specific methods for evaluating marketing strategy performance

Department of Marketing

What is Marketing Control?

Marketing control is the system by which a firm checks actual against planned performance, evaluating the profitability of products, customer segments, and territories.
The system is essential for revising current marketing strategies, formulating new strategies and allocating funds.

Department of Marketing

Marketing Control Systems

Marketing Control Systems provide information for: 1. Assessing and/or revising current strategy 2. Formulation of a new strategy 3. Allocating funds A control system needs to: 1. Continuously collect data about appropriate performance measures 2. Monitor the quality of strategy implementation against planned performance by evaluating profitability of products/services, customer segments and territories
Department of Marketing
4

Performance Measurement Tools: Balanced Scorecard

Balanced Scorecard is a framework that converts strategy goals into concrete performance measures. It focuses on four important areas: 1. Financial Perspective 2. Customer Perspective 3. Internal Perspective 4. Learning and Growth Perspective

Department of Marketing

Balanced Scorecard: Portrait of an integrated Strategy Map

Financial Perspective
Growth Strategy
Increase Shareholder Value

Productivity Strategy
Lower Operating Costs

Create Profitable Customer Revenues

Create Distinctive Customer Value by Enhancing the Customer Relationship Customer Perspective

From Commodity to Solution

Trusted Partner

Personalized Customer Service

Seamless Access

Image

Relationship

Service

Functionalit y

Internal Perspective

Improve Customer Experience

Leverage Customer Service

Personalized, Proactive Service

Rationalize Operations
Migrate to Appropriate Channels Streamline Processes, Business, and Brands

Mass Customization

Relationship Marketing

First Time Right

Innovation

Customer Management

Operational Excellence

Learning and Growth Perspective

Enhance Our People

Manage Organizational Change

Integrate Key Technologies

Align Organization

Develop new capabilities Identify new roles and responsibilities

Create CRM platform Build management and customer reporting

Communicate customer vision Align incentives to vision

1. Financial Perspective
Allow marketing managers to monitor the degree to which the firms strategy, implementation, and execution are contributing to improvements in profitability
Purpose Increase Shareholder Value Financial growth outcomes, to name a few, include:
% Profit from sales Sales growth Lower operating costs Inventory turns

Productivity outcomes, to name a few, include:

Department of Marketing

2. Customer Perspective
Defines the strategies on how the firm proposes to deliver a competitively superior value proposition to the targeted customer. Clarifies the conditions that create value for the customer. It could include:
a. Moving product image from commodity to branded product b. Personalized customer service c. Utilize Partners (Distributors or manufacturing reps)

Department of Marketing

Customer Perspective: Core Measures

Identifies market segments that will target

Market Share

Customer Acquisition

Customer Profitability

Customer Retention

Customer Satisfaction

3. Internal Perspective
Describes the business processes that directly affect the chosen strategies. This level transforms intangibles assets into customer and financial outcomes such as: Customer Relationship Management Innovation Management Operations Management Supply Chain Management Regulatory & Social Processes Management

Department of Marketing

10

4. Learning & Growth Perspective

Principal drivers of organizational learning are: Employee capabilities Information system capabilities The organizational climate for employee motivation and initiative These are intangible assets that must be aligned and integrated to create value.

Department of Marketing

11

Developing the Strategy: The Process - 1

Step 1: Financial and Productivity Growth Goals Long term revenue & short-term productivity Core objective to create shareholder value
> > Targets for revenue growth, profit contribution productivity goals

Step 2 : Customer Value Proposition for Target Customer Segments Core objective to create distinctive value
> The number of customers retained in targeted segments > The number of new customers acquired > Estimates the life time value of customers
Department of Marketing
12

Developing the Strategy: The Process - 2

Step 3: Establish Time Line for Results
Break down the short term financial goals in terms of particular functions or internal processes such as innovation management, customer relationship management etc.

Step 4: Identify Critical Strategic Themes

Operational excellence Customer management

Innovation management
Department of Marketing
13

Developing the Strategy: The Process - 3

Step 5: Identify the human, information, and organisational resources required to support the strategy
This step makes sure that everyone is aligned with the strategy by assuring they are trained and have the necessary information technology and incentives in place to implement it.

Step 6: Develop an Action Plan

this supports the overall strategy in a coordinated fashion. The outcome will result in an integrated bundle of investments. Department of Marketing

14

Marketing Strategy: Allocating Resources

The purpose of a marketing strategy is to yield results from invested resources. Results might include: 1. 2. 3. 4. 5. 6. Profit contribution % Market share Increase new customers Cost to serve customers Sales increase/customer Various other goals

In order to do this, there are four interrelated evaluations which are required to design a marketing strategy! They are

Department of Marketing

15

1 3

How much should we spend on marketing in the planned period?

2 4

How should we allocate marketing dollars?

Four Interrelated Evaluations

Within each element of our marketing strategy, how should we best allocate dollars to best achieve our marketing objectives? Which market segments, products, and geographic areas will be most profitable?

The Marketing Control Process

Marketing control is a process whereby management generates information on marketing performance. Two major forms of control are:
Control over efficient allocation of marketing effort Comparison of planned and actual performance

Department of Marketing

17

Levels of Marketing Controls

Department of Marketing

18

Marketing Controls at Various Levels - 1

Strategic control
Purpose: Focuses on assessing whether the strategy is being implemented as planned and whether it produces the intended results Tools: Periodic conduct of a marketing audit

Annual Plan Control

Purpose: Compares actual results against performance standards specified in the plan Tools: Sales analysis; Market share analysis
Department of Marketing
19

Control at Various Levels - 2

Efficiency and Effectiveness Control
Purpose: To examine the efficiency with which resources are being used in each element of marketing strategy and evaluate whether the strategic component is accomplishing its objective Tools: costs of implementing each element of marketing strategy against set goals and objectives of the marketing plan

Profitability Control
Purpose: To assess where the firm is making or losing money in terms of the important segments Tools: Marketing accounting information system example: Activity based cost system (ABC)

Department of Marketing

20

Discussion Questions
Andrew Dunning, CEO of a chemical corporation has added two new products to the firms offerings three years ago to serve the needs of three ANZSIC groups. Determine what type of information should be gathered by the firm to monitor and control the performance of these products. Describe how the strategy implementation challenges for a marketing manager working at Rio Tinto (a mining company) might be different from those for a marketing manager working at Colgate Palmolive (a consumer goods manufacturing firm).
Department of Marketing
21

Implementation of Business Marketing Strategy Marketing implementation is the process that translates marketing plans into action assignments and ensures that such assignments are executed in a manner that will accomplish a plans defined objectives.
Implementation Skills:
Interacting Allocating Monitoring Organising
Department of Marketing
22

George Day Asserts:

Effective business strategies are formed in a crucible of debate and dialogue between and within many levels of management. The challenge is to encourage realism in the dialogueso critical decisions are not distorted by wishful thinking and myopic analysiswhile not suppressing creativity and risk taking.

Reviewing Strategic Options: Seven Tough Questions

Department of Marketing

23

Illustrative Measures for Efficiency and Effectiveness Control- Product

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

24

Illustrative Measures for Efficiency and Effectiveness Control -Distribution

Distribution
Sales, expenses, and contribution by channel type. Sales and contribution margin by intermediary type and individual intermediaries. Sales relative to market potential by channel, intermediary type, and specific intermediaries. Expense-to-sales ratio by channel. Logistics cost by logistics activity by channel.

Department of Marketing

25

Illustrative Measures for Efficiency and Effectiveness Control - Communication

Communication
Advertising effectiveness by type of media. Actual audience/target audience ratio. Cost per contact. Number of calls, inquiries, 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.
Department of Marketing
26

Illustrative Measures for Efficiency and Effectiveness Control - Price

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

Department of Marketing

27

1 3

Interacting

Allocating

Four Implementation Skills

Monitoring

Organizing

Department of Marketing

28

Interacting & Allocating #1 Interacting

Marketing managers interact with internal and external peers. Best people have:
Good bargaining skills Referrent power skills

#2 Allocating
Allocating skills include controlling time, resources and people to get the marketing job done.

Department of Marketing

29

Monitoring & Organizing

#3 Monitoring
Marketing managers who demonstrate flexibility, understand the firms information & control systems (manage by numbers) can manage with/without formal control systems inadequacies.

#4 Organizing
Best managers know how to organize and motivate both:
Formal and Informal groups

Department of Marketing

30

The Big Picture

The next slide (fig. 17.2) synthesizes the materials discussed in Hutt & Spehs text.

Part 1 introduced major customer classifications. Part 2 focused on organizational buying behavior & customer relationship management. Part 3 discussed assessing marketing opportunities to include identifying, measuring and forecasting sales by market segments. Part 4 paid attention to challenges and opportunities that rapidly developing economies (RDEs) present to B2B firms. Part 5 explored various dimensions of the marketing control process.
Department of Marketing
31

Fig. 17.2

A Framework for Business Marketing Management

Department of Marketing

32

Next Lecture Business Marketing Strategies for Global Markets Revision Discussion on Exam Evaluation of the unit
Department of Marketing

33