Market-Based Management. What typifies successful businesses?

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Presentation transcript:

Market-Based Management

What typifies successful businesses?

Success/Profitability Drivers 1. Market attractiveness 2. Competitive advantage 3. Market orientation

Marketing Orientation Requires…… Market-based organizational structure Market-oriented employees Market-oriented culture Market-based management systems

A Market-Based Management System... Tracks and communicates both internal and external market performance metrics. Measures market-level profitability.

External Performance Metrics Indicators of future revenues and profits Customer awareness Customer interest Rate of product trial Degree of customer satisfaction/dissatisfaction Customer perceptions of quality and value Market share Customer retention Revenue per customer

Internal Performance Metrics Sales ROI Net profits

Market-Level Profitability How do marketing expenses impact a firm’s profitability? Net Marketing Contribution (NMC)= Market Demand Market Share Price/ Variable Cost/ Unit xx- Marketing Expenses -

Impact of NMC on net profit…. Net Profit= NMC - Operating Expenses Overhead Expenses -

Breakdown of NMC Formula Market x Market x (Price/unit - VC/unit) - Mkt Expenses Demand Share Mkt Demand (in units) x Mkt Share = Sales volume in units Sales vol. in units x Price/unit = Sales volume in dollars Price/unit - VC/unit = Contribution margin (CM) Price/unit x %margin = Contribution margin/unit Price/unit - contribution margin/unit = Variable cost/unit

Impact of NMC on Marketing Strategy... Market Demand Market Share Price/ Variable Cost/ Unit xx- - Marketing Expenses