powerpoint by: ray a. decormier, ph.d. central ct. state u. chapter 15: marketing performance...

PowerPoint by:Ray A. DeCormier, Ph.D.Central Ct. State U.

Chapter 15:

Marketing Performance Measurement

Astute marketers evaluate the profitability of alternative segments and assess their marketing mix to isolate problems and opportunities and, if necessary, alter strategy. From this chapter you will understand:

1. A system for converting a strategy vision into a concrete set of performance measures.

2. The function and significance of marketing control in business marketing management.

3. The components of the control process.

4. The distinctive value of “dashboards” for evaluating marketing strategy performance.

5. The importance of execution to the success of business marketing strategy.

Have you ever wanted to coach a sports team?

How about a baseball, basketball, hockey, soccer, field hockey, or football team?

Managing a B2B Marketing team is like being a B2B coach!

The CEO is like being the head manager a football team.

The marketing manager is the team coach.

The sales manager is the offensive coach.

The salesperson is the quarterback.

The rest of the players are part of the team.

Implementing a marketing program is like executing a play book.

Implementing a strategy is like implementing a series of downs.

Implementing a tactic is like implementing a play.

Sports Analogy (con’t)

5

The challenge is to select the correct strategy such as “Should we focus on running or passing”?

What are the other teams’ strengths and weaknesses and what are our strengths and weaknesses?

What plays should we employ to exploit the opposition’s weaknesses and check their strengths?

Business marketers do this same type of thinking when responding to customer needs and dealing with competitive influences.

Chief Marketing Officer (CMO) CouncilCEOs & Boards of Directors demand that CMOs

improve:Relevance AccountabilityPerformance of their marketing organizations

Key Importance: To prove marketing’s value there needs to be a measuring tool that provides key measures of performance. This can help:

1.Improve marketing’s efficiency.2.Improve marketing’s effectiveness.

This ranks among top challenges for CMOs.

Marketing Control Systems should provide information for:1. Assessing and/or revising current strategy 2. Formulation of a new strategy3. Allocating funds

A control system needs to:1. Continuously collect data about

appropriate performance measures2. Monitor the quality of strategy

implementation

Checks actual against planned performance by evaluating profitability of products, customer segments, and territories.

1. Develop the strategy2. Implement it 3. Control it4. Understand the whole process

It’s a necessary but very difficult task.

Visual representation of cause and

effect relationships

How to align processes to support

marketing strategy

One way to understand the nature of a strategy is to understand the Balanced Scorecard because it focuses on 4 important areas:

1.Financial Perspective2.Customer Perspective3.Internal Perspective4.Learning and Growth Perspective

Learning andGrowthPerspective

Manage Organizational Change

Enhance Our People

Integrate KeyTechnologies

AlignOrganization

Develop new capabilitiesIdentify new roles and responsibilities

Create CRM platformBuild management and customer reporting

Communicate customer visionAlign incentives to vision

InternalPerspective Improve Customer Experience Leverage Customer Service Rationalize Operations

Mass Customization

RelationshipMarketing

Personalized, Proactive Service

First TimeRight

Migrate toAppropriate

Channels

Streamline Processes, Business,

and Brands

Innovation Customer Management Operational Excellence

CustomerPerspective

Create Distinctive Customer Value by Enhancing the Customer Relationship

From Commodity to Solution

TrustedPartner

PersonalizedCustomerService

SeamlessAccess

Image Relationship Service Functionality

FinancialPerspective

Growth Strategy Productivity StrategyIncrease

ShareholderValue

Create Profitable Customer Revenues

Lower Operating

Costs

This section describes financial growth & productivity outcomes

for a certain purpose:T

his pinpoints the chain of logic by which intangible assets will be transformed into

tangible value.

I.Purpose Increase Shareholder Value

II.Financial growth outcomes, to name a few, include:

a.% Profit from sales

b.Sales growth

III.Productivity outcomes, to name a few, include:

a.Lower operating costs

b.Inventory turns



Enhance Our People


AlignOrganization





Mass Customization



First TimeRight


Channels


and Brands


CustomerPerspective



TrustedPartner


SeamlessAccess




ShareholderValue


Lower Operating

Costs

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 productb. Personalized customer servicec. Utilize Partners (Distributors or

manufacturing reps)



Enhance Our People


AlignOrganization





Mass Customization



First TimeRight


Channels


and Brands


CustomerPerspective



TrustedPartner


SeamlessAccess




ShareholderValue


Lower Operating

Costs

3. Internal PerspectiveThis describes the business processes that

directly affect the chosen strategies.This level transforms intangibles assets into

customer and financial outcomes such as:Customer Relationship ManagementInnovation ManagementOperations ManagementSupply Chain ManagementRegulatory & Social Processes Management



Enhance Our People


AlignOrganization





Mass Customization



First TimeRight


Channels


and Brands


CustomerPerspective



TrustedPartner


SeamlessAccess




ShareholderValue


Lower Operating

Costs

This describes the human, information and organizational capital to support value creating internal processes.

This defines the intangible assets that must be aligned and integrated to create value.



Enhance Our People


AlignOrganization





Mass Customization



First TimeRight


Channels


and Brands


CustomerPerspective



TrustedPartner


SeamlessAccess




ShareholderValue


Lower Operating

Costs

DEVELOPING THE STRATEGYSTEP 1: FINANCIAL AND GROWTH GOALS

The ultimate goal is to build shareholder value.

We might start with setting two major goals:

Financial & Productivitya. Long term financial goalsb. Long Term productivity goals

Next, we establish short-term goals for each area to form a value gap, which is the difference between a future desired state and the present reality state.

Step 1: Financial & Productivity Growth Goals

The difference between long and short term goals must be realistically analyzed because if it’s too much, it’ll discourage the organization from achieving it.

The goals must be functionally related and logical. For example, if you increase sales productivity, does it directly relate to more units sold and an increase in sales?

To achieve the large goals, set a number of smaller goals on a time line that work towards achieving the larger ones.


Financial Goals:

1. Large goal: Increase net worth 30% over 3 yrs.

2. Smaller goal: Increase net worth by 10%/yr.

a. Large: Increase sales by $2.1M within 3 yrs.

b. Smaller: Increase sales by $700K/yr.


Productivity Goals:

Large: Reduce operating costs by 15% in 3yrs.

Small: Reduce operating costs by 5% per/yr.



Enhance Our People


AlignOrganization





Mass Customization



First TimeRight


Channels


and Brands


CustomerPerspective



TrustedPartner


SeamlessAccess




ShareholderValue


Lower Operating

Costs

If you want to achieve increased sales (Step 1: $700K/yr) you’ll need to: Get new customers or Increase the business from customers

you already have.

To do that, you need to clearly and explicitly develop or promote your core Customer Value Proposition (CVP).

Four key customer value propositions ( recall from Ch. 7):

1.Low Total Costs2.Product Leadership Innovation3.Complete Customer Solutions4.Lock In (once a prospect is a

customer, the strategy is to keep him a customer)

Say we adopt “Low Total Costs.”

What does that mean to the customer?

It means our strategy will offer:

a. Attractive pricesb. Excellent & consistent quality at same or lower

pricesc. Ease of purchased. Responsive service and more around reducing

costs for the customer!

To coordinate the plan, start with long-term financial goals and break them into short term time frames. The marketing plan might present them in weekly, monthly and annual terms.

Break down the short term financial goals in terms of activity. What does increased sales mean in terms of activity? Does it mean:

a. Add more sales people?b. Develop more customers with present sales

people?c. Do more business with present customers?

Step 3: Establish Time Line for Results



Enhance Our People


AlignOrganization





Mass Customization



First TimeRight


Channels


and Brands


CustomerPerspective



TrustedPartner


SeamlessAccess




ShareholderValue


Lower Operating

Costs

STEP 4: IDENTIFY CRITICAL STRATEGIC THEMES Each customer value proposition is

interpreted into the company’s internal process objectives:

Internal process objectives support two critical elements of a company’s strategy:1.To create and deliver the customer value

proposition to the customer.2.To improve various internal operating

processes to reduce costs and enrich the productivity component from a financial perspective.

Step 4: Identify Critical Strategic ThemesStep 4: Identify Critical Strategic Themes

Internal Business Processes include:

1.Innovation Management2.Customer Management3.Operations Management

Balanced Scorecard: Boise Office Solutions Strategy Map



Enhance Our People


AlignOrganization





Mass Customization



First TimeRight


Channels


and Brands


CustomerPerspective



TrustedPartner


SeamlessAccess




ShareholderValue


Lower Operating

Costs

Recall From Step 2 above: Customer Value Proposition

Four Key Customer Value Propositions (Ch. 7)

1.Low Total Costs2.Product Leadership Innovation3.Complete Customer Solutions4.Lock In (once a prospect is a customer, the

strategy is to keep him a customer)

Step 5: Identify Human, Informational and Organizational Resources to Support Strategy

•Step 5 is concerned with the learning & growth level of the Balanced Scorecard.

•The three principal drivers are:1.Human Capital2.Information Capital3.Organizational Capital



Human CapitalEnhance Our

People

Information Capital Integrate KeyTechnologies

Organizational CapitalAlign Organization





Mass Customization



First TimeRight


Channels


and Brands


CustomerPerspective



TrustedPartner


SeamlessAccess




ShareholderValue


Lower Operating

Costs

Step 5: Identify Human, Informational and Organizational Resources to Support Strategy

Step 5 addresses the issue:How ready is the organization to support

the internal processes that drive the strategies?

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

Develop an action plan that provides funding for each strategic initiative.

By doing so, this supports the overall strategy in a coordinated fashion.

The outcome will result in an integrated bundle of investments. This idea is similar to a concept called “Zero Based Budgeting”

Translating the 6 Steps

Using this strategy MAP coupled with measurements of both activity and financial measures throughout each level…

1.Clearly describes the strategy2.Details objectives at critical internal processes that creates value3.Provides resources to implement the strategy in an integrated way …to achieve financial and productivity goals.



Enhance Our People


AlignOrganization





Mass Customization



First TimeRight


Channels


and Brands


CustomerPerspective



TrustedPartner


SeamlessAccess




ShareholderValue


Lower Operating

Costs

The purpose of a marketing strategy is to yield results from invested resources. Results might include:

1. Profit contribution2. % Market share3. Increase new

customers4. Cost to serve

customers5. Sales

increase/customer6. Various other goals

Interrelated Evaluations

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

They are…

How should we allocate marketing dollars?

(E.g., Advertising, personal selling, both?)

Within each marketing strategy element, how should we best allocate dollars to best achieve our marketing objectives? (E.g., Advertising media choices?)

Which market segments, products, and geographic areas will be most profitable?

1 2

43

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

After allocating resources, it is important to compare actual to planned and analyze the differences.

Performance is measured in $$$ & in activity.

Address deviations above/below planned.

What caused the difference?

Level of Marketing Controls

Table 15.1

Strategic control is based on a comprehensive evaluation of whether or not the firm is headed in the right direction.

Are we achieving our planned goals?

One way to assess success is to do a marketing audit. It should be: Comprehensive Periodic Systematic evaluation of marketing operations

It considers both the marketing environment & internal marketing activities Environment includes company image, customer characteristics,

competitive activities, regulatory constraints & economic trends Internal Marketing activities includes marketing objectives, organization

and implementation

Is a business strategy that provides performance feedback regarding the results of marketing efforts.

Companies with strong MPM programs outperformed competitors.

They had a positive influence on return on assets (ROA).

CEOs were pleased with the results.

Sales Analysis

Market share analysis.

Expense to sales ratios

Dashboards

A list of key metrics that provides management with information to track progress on marketing performance to business outcomes.

Example: Track no. of letters sent out and measure the number of qualified leads it generated.

How many of these leads actually resulted in new sales? Repeat sales?

Which metrics matter?

Isolated key performance drivers

Key Dashboard features Metrics suggest a course of action View of marketing’s value to the business Better alignment of marketing with the business Translate measures into meaningful information

Table 15.2 Examples of Marketing Metrics From Various Companies

Dashboard Metrics: Operation and Execution Operation metrics include:

Marketing budget ratio: Marketing costs/SalesProgram: Program (personal selling-ad

costs)/SalesAwareness to Demand ratio:

% of Marketing costs to awareness building vs. demand generation

Execution metrics determine how effectively the marketing strategy is being executedAre we building awareness?Are we creating and attaining new business?Are we keeping our old customers satisfied? Are we closing deals?

Sales by market segments

Sales relative to potential

Sales growth rates

Market share

Contribution margin

Percentage of total profits

Return on investment

Table 15.3

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

Table 17.3

Advertising effectiveness by media type

Actual audience/target audience ratio

Cost per contact

Number of calls, inquiries, and information requests by media type

Dollar sales per sales call

Sales per territory relative to potential sales

Selling expenses to sales ratios

New accounts per time period

Table 15.3

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 performanceTable 17.3

Activity & Profitability Control Activity-Based Costing (ABC method)

It’s an accounting system that links costs with various activities.

This method allocates costs to particular activities, customers, market segments.

Example:a.How much sales ($$$ & units)/customer. b.How much does it cost to service a

customer? c.What is the right mix?

PROFITABILITY CONTROL: BENEFITS OF ABC

The ABC method allows the business manager to focus on increasing profitability by:

a.Understanding the sources of cost variability

b.Developing strategies to:1. Reduce resource commitment2. Enhance resource productivity

Q: If it is too expensive to service a customer, how can we reduce that cost, make the salesperson more effective, and still have a profitable customer?

A: One way is to set up internal systems to recognize the problem and train the salesperson to handle this situation so he/she can get the customer to increase his weekly order to a profitable order size.

Implementing the Marketing Strategy

Marketing plans fail, not because they were not good, but because management implemented them poorly.

Implementation is the link between strategy formulation and performance!

Implementation is the process that translate plans into action!

Good marketing implementation is the process that assures that functional assignments are in line with the overall marketing strategy.

Politics: The Ultimate Problem

Often times, politics creates challenges for even the best plans.

Because of diverse functional areas that participate in the planning and implementation process, certain challenges emerge.

Thomas Bonoma asserts that there are four implementation skills that effective marketing managers should employ to lessen these concerns.

1 2

43

Interacting Allocating

Monitoring Organizing

#1 Interacting #2 Allocating Marketing

managers interact with internal and external peers.

Best people have: Good bargaining

skills Referent power skills

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

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

The following chart views interrelationships between various functional groups within an organization.

Marketing Specialists understand marketing.

Other functional specialists understand the “nuts and bolts” of their areas.

The objective is to bring them together to form a “synergistic pooling” of knowledge.

Decision Area

Marketing

Sales Manufact-uring

R&D Purchasing

Physical Distribution

Technical Service

S B U’s Corp. Level Planner

Product/ Service Quality

Technical Support

Physical Distribution

National Account Management

Channel Relations

Sales Support

Product / Service Innovation

Table 15.4

Abbreviations to indicate decision roles: R = Responsible; A = Approval;C = Consult; M = Implement; I = Inform; X = No role in decision

Marketer’s Role is to:

1. Insure maximum customer satisfaction.2. Develop strategies to facilitate a desired

market response (facilitate exchange).

To do this, marketers:A. Assume an active role in creating

strategyB. Coordinate strategies with other

functional membersC. Are the ones who integrate the

collective strength of the enterprise to satisfy customer needs profitably!

Recap

Once the marketing strategy is formulated, manager needs to evaluate responses from target markets.

The marketer will look for discrepancies between planned and actual performance.

The marketing control system facilitates this task and enables the marketer to reassess business opportunities and make adjustments as needed in either strategy and/or execution.

The Big PictureThe next frame (fig. 15.2) synthesizes the material

discussed in this book.

I. Part 1 introduced major customer classifications.

II. Part 2 focused on organizational buying behavior & customer relationship management.

III. Part 3 discussed assessing marketing opportunities to include identifying, measuring and forecasting sales by market segments.

IV. Part 4 paid attention to challenges and opportunities that rapidly developing economies (RDEs) present to B2B firms.

V. Part 5 explored various dimensions of the marketing control process.

Fig. 15.2

powerpoint by: ray a. decormier, ph.d. central ct. state u. chapter 15: marketing performance...

Documents

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marketing manager

b2b marketing team

marketing mix

marketing program

marketing control systems

business marketing management

strategy vision