Ch15 eval strategy perform

Marketing Performance
Measurement

 Marketing Control Systems should 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

Checks actual against planned performance by
evaluating profitability of products, customer
segments, and territories.
1. Develop the strategy
2. Implement it
3. Control it
4. 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 Perspective
2.Customer Perspective
3.Internal Perspective
4.Learning and Growth Perspective

Learning and
Growth
Perspective
Manage Organizational Change
Enhance Our
People
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
Internal
Perspective Improve Customer Experience Leverage Customer Service Rationalize Operations
Mass
Customization
Relationship
Marketing
Personalized,
Proactive
Service
First Time
Right
Migrate to
Appropriate
Channels
Streamline
Processes,
Business,
and Brands
Innovation Customer Management Operational Excellence
Customer
Perspective
Create Distinctive Customer Value by Enhancing the Customer Relationship
From
Commodity
to Solution
Trusted
Partner
Personalized
Customer
Service
Seamless
Access
Image Relationship Service Functionality
Financial
Perspective
Growth Strategy Productivity
StrategyIncrease
Shareholder
Value
Create Profitable
Customer
Revenues
Lower
Operating
Costs

 This section describes financial growth & productivity outcomes
for a certain purpose:
 This 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

 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)

3. Internal Perspective
 This 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

4. LEARNING & GROWTH PERSPECTIVE
 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.

DEVELOPING THE STRATEGY
STEP 1: FINANCIAL AND GROWTH GOALS
 The ultimate goal is to build shareholder value.
 We might start with setting two major goals:
 Financial & Productivity
a. Long term financial goals
b. 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.

 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. LowTotal Costs
2. Product Leadership Innovation
3. Complete Customer Solutions
4. 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 prices
b. Excellent & consistent quality at same or lower prices
c. Ease of purchase
d. 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

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 Themes
 Internal Business Processes include:
1.Innovation Management
2.Customer Management
3.Operations Management

Balanced Scorecard: Boise Office Solutions Strategy Map
Learning and
Growth
Perspective
Enhance Our
People
Integrate Key
Technologies
Align
Organization
Internal
Mass
Customization
Relationship
Marketing
Personalized,
Proactive
Service
First Time
Right
Migrate to
Appropriate
Channels
Streamline
Processes,
Business,
and Brands
Customer
Perspective
From
Commodity
to Solution
Trusted
Partner
Personalized
Customer
Service
Seamless
Access
Financial
Perspective
StrategyIncrease
Shareholder
Value
Create Profitable
Customer
Revenues
Lower
Operating
Costs

Recall From Step 2 above:
Customer Value Proposition
Four Key Customer Value Propositions
(Ch. 7)
1.Low Total Costs
2.Product Leadership Innovation
3.Complete Customer Solutions
4.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 Capital
2.Information Capital
3.Organizational Capital

Learning and
Growth
Perspective
Human Capital
Enhance Our
People
Information Capital
Integrate Key
Technologies
Organizational Capital
Align Organization
Internal
Mass
Customization
Relationship
Marketing
Personalized,
Proactive
Service
First Time
Right
Migrate to
Appropriate
Channels
Streamline
Processes,
Business,
and Brands
Customer
Perspective
From
Commodity
to Solution
Trusted
Partner
Personalized
Customer
Service
Seamless
Access
Financial
Perspective
StrategyIncrease
Shareholder
Value
Create Profitable
Customer
Revenues
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 strategy
2. Details objectives at critical internal
processes that creates value
3. Provides resources to implement the
strategy in an integrated way
…to achieve financial and productivity goals.

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

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/Sales
 Program: Program (personal selling-ad costs)/Sales
 Awareness to Demand ratio:
 % of Marketing costs to awareness building vs. demand
generation
 Execution metrics determine how effectively the
marketing strategy is being executed
 Are 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 performance
Table 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 commitment
2. 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.
Marketing Strategy Implementation Guide

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 strategy
B. Coordinate strategies with other functional
members
C. 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 Picture
 The 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.

Ch15 eval strategy perform

Ch15 eval strategy perform

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