week 7 discussion

Performance Measurement Forecasting Budgeting Metrics

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Measurement and Control Measurement

• Forecasts of future sales and costs,

• Budgets allocating financial resources,

• Schedules identifying the timing of marketing tasks, and

• Metrics to gauge progress toward achieving objectives.

Control

• Identify

• Analyze

• Correct

Overview of Measurement Tools Professor Mark Rendon

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Forecasts

• Are future projections of what sales and costs are likely to be in the months and years covered in the plan.

• Can never be more than good estimates.

• However, still should be as accurate as possible.

• Need to be reviewed often.

• Must account for the effect that marketing activities will have on the direction and velocity of sales.

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Forecasts of Sales and Costs

• External factors to consider: • Demand

• Threats

• Opportunities

• Internal factors to consider: • Goals

• Capabilities

• Constraints

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Types of Forecasts

• Market and segment sales

• Company product sales

• Cost of sales

• Sales and costs by channel

Creating the forecasts is only part of the task. Next,

month-to-month and year-to-year changes must be

estimated in order to examine trends and rates of

change.

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Sources of Information For Forecasting

• Value-chain partners

• Primary research: • Studies of buying patterns and buying intentions.

• Secondary research: • Trade associations.

• Government statistics.

• Industry analyst reports.

• Judgment is typically used to fine-tune the estimates.

Judgment-based Forecasting Professor Mark Rendon

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Forecasting New Products • Forecasting for new products is even more challenging than

for existing products.

• Bass model appropriate when: • The company has been able to collect sales data for even a

brief period , and • The product is similar to an existing product or technology

with a known sales history.

• When the product is so innovative that it establishes a new product category, companies will: • Use simulated test markets. • Look at sales patterns of products with similar market

behavior.

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Budgets • Budgets are time-defined allocations of financial

outlays for specific functions, programs, customer segments or geographic regions.

• Enable marketing managers to: • Allocate expenses, and

• Compare estimates with actual expenses.

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Examples of Budgeting Policies

• Insist that budget preparation follow internal financial calendars.

• Specify profit hurdles.

• Specify particular assumptions about expenses and allocations.

• Mandate particular formats or supporting documentation.

• Based upon best-case, worst-case and most-likely scenarios.

• Adjusting budgets monthly instead of annually.

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Budgeting Methods

• Affordability budgeting

• Percentage-of-sales budgeting

• Comparative-parity budgeting

• Objective-and-task budgeting

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Affordability Budgeting

• Budgeting what you believe you can afford.

• May work for start-ups.

• Generally, not a good way to budget. • Doesn’t allow for the kinds of significant, ongoing

investments often needed to launch major new products or enter intensely competitive markets.

• Ignores profit payback calculation.

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Percentage-of-sales Budgeting

• Management sets aside a certain percentage of dollar sales to fund marketing programs.

• Based on internal budgeting guidelines or previous marketing experience.

• Advantage: Simple to implement.

• Disadvantages: • Sales are seen as the source of marketing funding, rather

than as the result of budget investments.

• Difficult to justify the % set aside for marketing.

• Self-defeating: lower sales may lead to a lower marketing budget.

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Comparative-parity Budgeting

• Funding marketing by matching what competitors spend.

• Advantage: Simple to implement.

• Disadvantages: • Ignores differences between companies.

• Doesn’t allow for adjustments to meet specific marketing objectives.

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Objective-and-task Budgeting

• Adding up the cost of completing all of the marketing tasks needed to achieve marketing plan objectives.

• Advantage: A reasonable build-up method.

• Disadvantage: May add up to more than the firm can afford. Priorities may have to be established.

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Budgets Within the Marketing Budget

• Budgets for each marketing mix program.

• Budgets for each brand, segment or market.

• Budgets for each region or geographic division.

• Budgets for each division or product manager.

• Budget summarizing all marketing expenses.

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Schedules

• Schedules are time-defined plans for completing a series of tasks or activities related to a specific program or objective. • Timing should be as concrete as possible.

• Help avoid conflicts.

• Help measure progress toward completion.

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The Scheduling Process

• List the main tasks and activities.

• Assign each a projected start and end date. • Through research or experience.

• Determine who is responsible for each task.

• Develop an overall summary schedule.

• Develop detailed schedules for each sub-program. • Gantt charts.

• Critical path schedules.

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Metrics

Metrics:

• Focus employees on activities that make a difference.

• Set up performance expectations that can be objectively measured.

• Lay a foundation for internal accountability and pride in accomplishments.

Main Categories of Metrics Professor Mark Rendon

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Marketing Dashboard

• A marketing dashboard is a computerized, graphical presentation that helps management track important metrics over time and spot patterns that signal deviations from the marketing plan.

• Helps managers see the situation at a glance, based upon a limited number of data inputs.

• Varying levels of dashboards: Corporate, divisional or functional.

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Identifying Metrics

Methods of identifying appropriate metrics include:

• Working backward from mission, goals and objectives.

• Looking for key components or activities related to customer buying behavior.

• This would include metrics for each of the three key areas: • Marketing objectives,

• Financial objectives, and

• Societal objectives

Sample Marketing Metrics

Objective Metric

To acquire new customers.

Measure number or percentage

of new customers acquired by

month, quarter, year.

To retain current customers.

Measure number or percentage

of customers who continue

purchasing during a set period.

To increase market share.

Measure dollar or unit sales

divided by total industry sales

during a set period.

To accelerate product development

Measure the time needed to

bring a new product to market.

Sample Financial Metrics

Objective Metric

To increase sales revenue by product.

Measure product sales in

dollars per week, month,

quarter, or year.

To improve profitability. Measure gross or net margin for

a set period byproduct, line,

channel, marketing program or

customer.

To reach break-even. Measure the number of weeks

or months until a product’s

revenue equals and begins to

exceed costs.

Sample Societal Metrics

Objective Metric

To make products more environmentally friendly.

Measure the proportion of each

product’s parts that are

recyclable or have been recycled

during a set period.

To build awareness of a social issue.

Measure awareness among the

target audience after the

program or a set period.

To conserve electricity or fuel.

Measure amount used by month,

quarter, year.

Metrics Based on Customer Behavior Professor Mark Rendon

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Using Metrics

Metrics are most valuable to the marketer when viewed in the context of:

• Expected outcomes.

• Historical results.

• Competitive or industry outcomes.

• Environmental influences.

Keys to Success in Implementing a Marketing Plan

Professor Mark Rendon

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Controlling Marketing Plan Implementation

Four types of marketing control help marketers gauge the effectiveness of the plan implementation:

• Annual Plan,

• Profitability,

• Productivity, and

• Strategic Control

Four Forms of Control

Professor Mark Rendon

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Applying Control

1. Set objectives.

2. Determine metrics.

3. Determine measurement intervals.

4. Measure.

5. Take corrective action, if necessary. • Or modify standards and/or objectives.