Chapter 9Chapter 9
Marketing Strategy
Reformulation:
The Control Process
9-2
In this chapter, you will In this chapter, you will learn about…learn about…
1. Strategic Change
Sources of Strategic Change
Strategic Change: Threat or
Opportunity?
2. Operations Control
Nature of Marketing Cost Analysis
Product-Service Mix Control
Sales Control
Marketing Channel Control
9-3
In this chapter, you will In this chapter, you will learn about…learn about…
3. Considerations in Marketing Control
Problems versus Symptoms
Effectiveness versus Efficiency
Data versus Information
9-4
Components of Marketing Components of Marketing ControlControl
MARKETING CONTROLMARKETING CONTROL
Doing the right things
Operations ControlStrategic Control
Doing things right
9-5
Remedial Actions under..Remedial Actions under..
Improving effectiveness in seeking opportunities and mitigating threats
in the environment
StrategicStrategicControlControl
Operations Operations ControlControl
Focus on heightening the marketing effort or
identifying ways to improve efficiency
9-6
Strategic ChangeStrategic Change
Change in the environment that
will affect the long-run well-being
of the organization
9-7
Sources of Strategic Sources of Strategic ChangeChange
Market Evolution(Calcium)
Technological Innovation
(DVDs)
Market Redefinition(Electronic
banking)
Change in Marketing Channels(Internet)
9-8
Dealing with Strategic Dealing with Strategic ChangeChange
Attempt to marshal the resources necessary
to alter its technical and marketing
capabilities to fit market-success
requirements.
Shift emphasis to product markets where
match between success requirements and
the firm’s distinctive competency is clear.
Leave the industry.
Goal of Goal of Operations ControlOperations Control
To Improve the Productivity
of Marketing Efforts
Purpose of Marketing-Purpose of Marketing-Cost AnalysisCost Analysis
To trace, assign, or allocate costs to a
specified marketing activity or entity in a
manner that accurately displays the financial
contribution of activities or entities to the
organization. It is based on the principle that
certain costs are directly or indirectly
assignable to every market segment.
To trace, assign, or allocate costs to a
specified marketing activity or entity in a
manner that accurately displays the financial
contribution of activities or entities to the
organization. It is based on the principle that
certain costs are directly or indirectly
assignable to every market segment.
9-11
Marketing Segment Marketing Segment Variables for Cost Variables for Cost
AnalysisAnalysis
Marketing Channels
Elements of Product-Service
Offering
Sales Divisions, District, or Territories
Type or Size of Customers
9-12
Issues in Issues in Cost AllocationCost Allocation
How should costs be allocated to
separate market segments?
What costs should be allocated?
Should all costs be allocated to
market segments?
9-13
Product-Service Product-Service Mix ControlMix Control
Assessing the performance of the offerings
Sales (Kodak vs. Fuji)
Market Share (Goodyear)
Appraising financial worth of product-service offerings
Assign costs to offerings (red-eye flight)
Contribution-margin approach (gas station)
Sales ControlSales Control
Sales ControlSales Control
Cost Aspects
PerformanceExpenses
Sales-function Administration
Behavioral Aspects
Sales EffortAllocation of Selling-Time
9-15
Measures to Assess Measures to Assess Sales PerformanceSales Performance
Gross ProfitSales Revenue
Sales CallFrequency
Penetration of Accounts in
Sales Territory
Selling and Sales Administration
Expenses
Example of Disaggregating Service Example of Disaggregating Service Station Costs for Product-Service Mix Control Station Costs for Product-Service Mix Control
($’000)($’000)
Department
Total GasolineGeneral
MerchandiseAutomobile
Service
Sales $4000 $2000 $1700 $300
COGS and Variable Expenses
$3000 $1600 $1220 $180
Contribution Margin $1000 $400 $480 $120
Fixed Expenses $900 $500 $310 $90
Net Income $100 ($100) $170 $30
Performance Summary for Two Sales RepsPerformance Summary for Two Sales Reps
(1) (2) (3) (4) (5) (6) (7)
Account Category
Potential Accts in
Sales Dt.
Active Accts.
Sales Volume
Gross Profit
Total Calls
Selling Expenses
Sales Admin.
A 80 60 $48000 $14000 195 $18400
B 60 40 $44000 $15400 200 $17900
C 40 10 $25000 $12250 50 $11250
D 20 6 $33000 $16500 42 $9000
Totals 200 116 $150000 $58550 487 $56550 $10000
Selected Operating Indices of Sales Selected Operating Indices of Sales PerformancePerformance
Account Category
Sales Volume / Active Account
(Col 3 Col 4)
Gross Profit / Active
Account
(Col 4 Col 2)
Selling Expenses /
Active Account
(Col 6 Col 2)
Contribution to Sales Admin.
(Gross Profit – Selling
Expenses)
A $800 $240 $307 -$67
B $1100 $385 $448 -$63
C $2500 $1225 $1125 $100
D $5500 $2750 $1500 $1250
Selected Operating Indices of Sales Selected Operating Indices of Sales PerformancePerformance
Account Category
Account Penetration
(Col 2 Col 3)
Call Frequency /
Active Account
(Col 5Col 2)
Selling Expenses per
Call
(Col 6 Col 5)
Gross Profit % / Active Account (Col 4 Col 3)
A 75% 3.25 $94.36 30%
B 67% 5.00 $89.50 35%
C 25% 5.00 $225.00 49%
D 30% 7.00 $214.29 50%
9-20
Marketing Channel Marketing Channel ControlControl
Assess Environmental and
Organizational Factors
Assess Environmental and
Organizational Factors
Evaluate Profitability of
Marketing Channels
Evaluate Profitability of
Marketing Channels
9-21
Types of Costs in Types of Costs in Marketing Channel Marketing Channel
ControlControl
Include sales expenses and advertising allowances
Order-Order-Getting Getting
CostCost
Include packaging and delivery costs, warehousing costs, and billing costs
Order-Order-Servicing Servicing
CostCost
Marketing ChannelMarketing Channel
TotalFurniture
StoresHardware
Stores
Home Improvement
Stores
Sales $12000 $5000 $5000 $2000
COGS $8000 $3500 $3100 $1400
Gross Margin $4000 $1500 $1900 $600
Expenses
Selling $1000 $617 $216 $167
Advertising $750 $450 $150 $150
Pkg & Delivery $800 $370 $300 $130
Warehousing $400 $200 $150 $50
Billing $600 $300 $250 $50
Total Expenses $3550 $1937 $1066 $547
Net Income (Loss) $450 ($437) $834 $53
Disaggregated Costs of Furniture Improvement Disaggregated Costs of Furniture Improvement Products for Marketing Channel Control ($’000)Products for Marketing Channel Control ($’000)
9-23
Considerations in Considerations in Marketing ControlMarketing Control
Problemsversus
Symptoms
EffectivenessEffectivenessversusversus
EfficiencyEfficiency
DataDataversusversus
InformationInformation