Everything about marketing Part6

Performance analysis
The most important elements of marketing performance, which are normally tracked, are:
Sales analysis
Most organizations track their sales results; or, in non-profit organizations for example, the number of clients. The more sophisticated track them in terms of 'sales variance' - the deviation from the target figures - which allows a more immediate picture of deviations to become evident. `Micro- analysis', which is a nicely pseudo-scientific term for the normal management process of investigating detailed problems, then investigates the individual elements (individual products, sales territories, customers and so on) which are failing to meet targets.
Market share analysis
Relatively few organizations, however, track market share. In some circumstances this may well be a much more important measure. Sales may still be increasing, in an expanding market, while share is actually decreasing - boding ill for future sales when the market eventually starts to drop. Where such market share is tracked, there may be a number of aspects which will be followed:
overall market share
segment share - that in the specific, targeted segment
relative share -in relation to the market leaders
Expense analysis
The key ratio to watch in this area is usually the `marketing expense to sales ratio'; although this may be broken down into other elements (advertising to sales, sales administration to sales, and so on).
Financial Analysis
The `bottom line' of marketing activities should at least in theory, be the net profit (for all except non-profit organizations, where the comparable emphasis may be on remaining within budgeted costs). There are a number of separate performance figures and key ratios which need to be tracked:
gross contribution<>net profit
gross profit<>return on investment
net contribution<>profit on sales
There can be considerable benefit in comparing these figures with those achieved by other organizations (especially those in the same industry); using, for instance, the figures which can be obtained (in the UK) from `The Centre for Interfirm Comparison'. The most sophisticated use of this approach, however, is typically by those making use of PIMS (Profit Impact of Management Strategies), initiated by the General Electric Company and then developed by Harvard Business School, but now run by the Strategic Planning Institute.
The above performance analyses concentrate on the quantitative measures which are directly related to short-term performance. But there are a number of indirect measures, essentially tracking customer attitudes, which can also indicate the organization's performance in terms of its longer-term marketing strengths and may accordingly be even more important indicators. Some useful measures are:
market research - including customer panels (which are used to track changes over time)
lost business - the orders which were lost because, for example, the stock was not available or the product did not meet the customer's exact requirements
customer complaints - how many customers complain about the products or services, or the organization itself, and about what
Use of Marketing Plans
A formal, written marketing plan is essential; in that it provides an unambiguous reference point for activities throughout the planning period. However, perhaps the most important benefit of these plans is the planning process itself. This typically offers a unique opportunity, a forum, for `information-rich' and productively focused discussions between the various managers involved. The plan, together with the associated discussions, then provides an agreed context for their subsequent management activities, even for those not described in the plan itself.
Budgets as Managerial Tools
The classic quantification of a marketing plan appears in the form of budgets. Because these are so rigorously quantified, they are particularly important. They should, thus, represent an unequivocal projection of actions and expected results. What is more, they should be capable of being monitored accurately; and, indeed, performance against budget is the main (regular) management review process.
The purpose of a marketing budget is, thus, to pull together all the revenues and costs involved in marketing into one comprehensive document. It is a managerial tool that balances what is needed to be spent against what can be afforded, and helps make choices about priorities. It is then used in monitoring performance in practice.
The marketing budget is usually the most powerful tool by which you think through the relationship between desired results and available means. Its starting point should be the marketing strategies and plans, which have already been formulated in the marketing plan itself; although, in practice, the two will run in parallel and will interact. At the very least, the rigorous, highly quantified, budgets may cause a rethink of some of the more optimistic elements of the plans.
Approaches to budgeting
Many budgets are based on history. They are the equivalent of `time-series' forecasting. It is assumed that next year's budgets should follow some trend that is discernible over recent history. Other alternatives are based on a simple `percentage of sales' or on `what the competitors are doing'.
However, there are many other alternatives - Ven:
Affordable - This may be the most common approach to budgeting. Someone, typically the managing director on behalf of the board, decides what is a `reasonable' promotional budget; what can be afforded. This figure is most often based on historical spending. This approach assumes that promotion is a cost; and sometimes is seen as an avoidable cost.
Percentage of revenue - This is a variation of `affordable', but at least it forges a link with sales volume, in that the budget will be set at a certain percentage of revenue, and thus follows trends in sales. However, it does imply that promotion is a result of sales, rather than the other way round.
Both of these methods are seen by many managements to be `realistic', in that they reflect the reality of the business strategies as those managements see it. On the other hand, neither makes any allowance for change. They do not allow for the development to meet emerging market opportunities and, at the other end of the scale, they continue to pour money into a dying product or service (the `dog').
Competitive parity - In this case, the organization relates its budgets to what the competitors are doing: for example, it matches their budgets, or beats them, or spends a proportion of what the brand leader is spending. On the other hand, it assumes that the competitors know best; in which case, the service or product can expect to be nothing more than a follower.
Zero-based budgeting - In essence, this approach takes the objectives, as set out in the marketing plan, together with the resulting planned activities and then costs them out. Differences between marketing and business plans.
CUSSTOMER VALUE
Difference between customer realization and sacrifice. Realization is what the customer receives, which includes product features, quality, and service. This takes into account the customer's cost to use, maintain, and dispose of the product or service. Sacrifice is what a customer gives up, which includes the amount the customer pays for the product plus the time and effort spent acquiring the product and learning how to use it. Maximizing customer value means maximizing the difference between realizations