2. P ART VI C ONTROLING THE S ALES T EAM

3. C HAPTER 15 A NALYSIS OF S ALES AND M ARKETING C OSTS

5. M ARKETING A UDIT The marketing audit is an evaluation tool designed to appraise the entire marketing operation in a systematic and comprehensive manner.

6. S ALES F ORCE A UDIT A sales force audit involves the same six factors the marketing audit measures but is designed to evaluate selling strategy and to improve overall sales force effectiveness.

9. The 80/20 or “concentration” principle states that the majority of a company’s sales (or profits) may result directly from a very small number of the company’s accounts, product or price lines, or geographic areas.

10. D IRECTING THE M ARKETING E FFORT Marketing dollars must be allocated in a way that best generates high sales volume and net profits by concentrating marketing effort in the most profitable areas.

11. Iceberg Principle The iceberg principle refers to the effect that averaging, summarizing, and aggregating data can have on presenting the true sales or profit picture and underlying problems.

13. N ET S ALES V OLUME A NALYSIS W HAT I S S ALES A NALYSIS? Sales analysis is the detailed examination of a company’s sales data and involves assimilating, classifying, comparing, and drawing conclusions.

17. ANALYZING SALES VOLUME Total sales volume is the first indication of how the company is faring in the marketplace. Retail sales index is a relative measure of the dollar volume of retail sales that normally occur in each respective district.

18. M ARKETING C OST A NALYSIS Marketing cost analysis, or distribution cost analysis, is the analysis of costs that affect sales volume, with the purpose of determining the profitability of different segment operations. Profitability is determined by sales volume and its associated costs and expenses . W HAT I S M ARKETING C OST A NALYSIS?

22. O BJECTIVES OF M ARKETING C OST A NALYSIS The major objectives of marketing cost analysis are to determine the isolated contributions made to profitability and to evaluate the efficiency of all phases of the company’s marketing structure in terms of corporate goals and objectives.

24. A SSIGNING M ARKETING C OSTS Marketing vs. Production Costs A production cost is the cost incurred by processing a product from its raw elements to a finished state.

27. Functional marketing groups are groups within the marketing operation that perform similar functions.

28. M ETHODS FOR D ETERMINING P ROFITABILITY With the full cost (or net profit) approach, all costs (variable and fixed) are allocated among the market segments using the categories of goods sold (production costs) and operating expenses (nonproduction costs, including marketing costs). In the contribution margin approach, costs are separated according to controllability.

34. T HE B OTTOM L INE Net sales volume analysis and marketing cost analysis are useful to the marketing manager for planning and controlling the marketing program. A marketing audit is a systematic appraisal of the marketing operations as a whole, which aids in effective control and in developing new strategies. Misdirected marketing effort occurs when management ignores the effects of the 80/20 and iceberg principles. Sales analysis is the detailed analysis of a company’s sales data and may incorporate breakdowns by account, customer class, territory, product line, and other categories.

35. Sales volume analysis alone is insufficient as a basis for marketing decisions. Marketing cost analysis is primarily concerned with marketing costs. Commonly used cost classifications include direct versus indirect costs, fixed versus variable costs, standard costs, and controllable versus uncontrollable costs. Two separate approaches may be taken for determining aggregate or segment profitability: full cost or contribution margin. The productivity of marketing operations can be increased by minimizing unit costs and maximizing net profit. Variance analysis is useful for cost control. T HE B OTTOM L INE