Marketing Strategy Reformulation: Chapter 9 Marketing Strategy Reformulation: The Control Process

In this chapter, you will learn about… Strategic Change Sources of Strategic Change Strategic Change: Threat or Opportunity? Operations Control Nature of Marketing Cost Analysis Product-Service Mix Control Sales Control Marketing Channel Control

In this chapter, you will learn about… Considerations in Marketing Control Problems versus Symptoms Effectiveness versus Efficiency Data versus Information

Components of Marketing Control Strategic Control Doing things right Doing the right things Operations Control

Remedial Actions under.. Improving effectiveness in seeking opportunities and mitigating threats in the environment Strategic Control Operations Control Focus on heightening the marketing effort or identifying ways to improve efficiency

Strategic Change Change in the environment that will affect the long-run well-being of the organization

Sources of Strategic Change Market Evolution (Calcium) Technological Innovation (DVDs) Market Redefinition (Electronic banking) Change in Marketing Channels (Internet)

Dealing with Strategic Change 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 Operations Control To Improve the Productivity of Marketing Efforts

Purpose of Marketing-Cost 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.

Marketing Segment Variables for Cost Analysis Channels Elements of Product-Service Offering Sales Divisions, District, or Territories Type or Size of Customers

Issues in Cost Allocation How should costs be allocated to separate market segments? What costs should be allocated? Should all costs be allocated to market segments?

Product-Service Mix 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-function Administration Sales Control Sales Control Behavioral Aspects Sales Effort Allocation of Selling-Time Cost Aspects Performance Expenses Sales-function Administration

Measures to Assess Sales Performance Sales Revenue Gross Profit Penetration of Accounts in Sales Territory Sales Call Frequency Selling and Sales Administration Expenses

Example of Disaggregating Service Station Costs for Product-Service Mix Control ($’000) Department Total Gasoline General Merchandise Automobile 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 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 40 $44000 $15400 200 $17900 C 10 $25000 $12250 50 $11250 D 20 6 $33000 $16500 42 $9000 Totals 116 $150000 $58550 487 $56550 $10000

Selected Operating Indices of Sales Performance 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 Performance Account Category Account Penetration (Col 2 Col 3) Call Frequency / Active Account (Col 5Col 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% $225.00 49% D 7.00 $214.29 50%

Marketing Channel Control Assess Environmental and Organizational Factors Evaluate Profitability of Marketing Channels

Types of Costs in Marketing Channel Control Include sales expenses and advertising allowances Order- Getting Cost Include packaging and delivery costs, warehousing costs, and billing costs Order- Servicing Cost

Home Improvement Stores Disaggregated Costs of Furniture Improvement Products for Marketing Channel Control ($’000) Marketing Channel Total Furniture Stores Hardware Stores Home Improvement Stores Sales $12000 $5000 $2000 COGS $8000 $3500 $3100 $1400 Gross Margin $4000 $1500 $1900 $600 Expenses Selling $1000 $617 $216 $167 Advertising $750 $450 $150 Pkg & Delivery $800 $370 $300 $130 Warehousing $400 $200 $50 Billing $250 Total Expenses $3550 $1937 $1066 $547 Net Income (Loss) ($437) $834 $53

Considerations in Marketing Control Problems versus Symptoms Data versus Information Effectiveness versus Efficiency