Chapter 9

Marketing Strategy Reformulation: The Control Process

In this chapter, you will learn about

1. Strategic Change Sources of Strategic Change

Strategic Change: Threat or

Opportunity? 2. Operations Control

Nature of Marketing Cost Analysis

Product-Service Mix Control Sales Control

Marketing Channel Control

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In this chapter, you will learn about

3. Considerations in Marketing Control Problems versus Symptoms Effectiveness versus Efficiency

Data versus Information

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Components of Marketing Control

MARKETING CONTROL

Strategic Control

Operations Control

Doing things right

Doing the right things

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Remedial Actions under..

Strategic Control Operations Control

Improving effectiveness in seeking opportunities and mitigating threats in the environment

Focus on heightening the marketing effort or identifying ways to improve efficiency

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Strategic Change

Change in the environment that

will affect the long-run well-being

of the organization

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Sources of Strategic Change

Technological Innovation (DVDs)

Market Evolution (Calcium)

Market Redefinition (Electronic banking)

Change in Marketing Channels (Internet)

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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 firms distinctive competency is clear.

Leave the industry.

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Goal of Operations Control

To Improve the Productivity of Marketing Efforts

Purpose of MarketingCost 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

Marketing Channels Elements of Product-Service Offering Sales Divisions, District, or Territories Type or Size of Customers
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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?

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Product-Service Mix Control

Assessing the performance of the offerings
Sales (Kodak vs. Fuji)

Market Share (Goodyear)

Appraising financial worth of productservice offerings

Assign costs to offerings (red-eye flight)

Contribution-margin approach (gas station)

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Sales Control
Sales Control

Behavioral Aspects

Cost Aspects

Sales Effort

Allocation of Selling-Time

Performance Expenses

Sales-function Administration

Measures to Assess Sales Performance

Sales Revenue
Penetration of Accounts in Sales Territory

Gross Profit

Sales Call Frequency

Selling and Sales Administration Expenses

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Example of Disaggregating Service

Station Costs for Product-Service Mix Control ($000)
Department Total Sales COGS and Variable Expenses Contribution Margin $4000 Gasoline $2000 General Merchandise $1700 Automobile Service $300

$3000
$1000

$1600
$400

$1220
$480

$180
$120

Fixed Expenses
Net Income

$900
$100

$500
($100)

$310
$170

$90
$30

Performance Summary for Two Sales Reps

(1) Account Category Potential Accts in Sales Dt. (2) Active Accts. (3) Sales Volume (4) Gross Profit (5) Total Calls (6) Selling Expenses (7) Sales Admin.

A B C D Totals

80 60 40 20 200

60 40 10 6 116

$48000 $44000 $25000 $33000 $150000

$14000 $15400 $12250 $16500 $58550

195 200 50 42 487

$18400 $17900 $11250 $9000 $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 B

$800 $1100

$240 $385

$307 $448

-$67 -$63

C
D

$2500
$5500

$1225
$2750

$1125
$1500

$100
$1250

Selected Operating Indices of Sales Performance

Account Category Account Penetration (Col 2 Col 3) Call Frequency / Active Account (Col 5Col 2) Selling Expenses per Call (Col 6 Col 5) Gross Profit % / Active Account (Col 4 Col 3)

A B C D

75% 67% 25% 30%

3.25 5.00 5.00 7.00

$94.36 $89.50 $225.00 $214.29

30% 35% 49% 50%

Marketing Channel Control

Assess Environmental and Organizational Factors

Evaluate Profitability of Marketing Channels

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Types of Costs in Marketing Channel Control

OrderGetting Cost
Include sales expenses and advertising allowances

OrderServicing Cost

Include packaging and delivery costs, warehousing costs, and billing costs
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Disaggregated Costs of Furniture Improvement Products for Marketing Channel Control ($000)
Marketing Channel Total Sales COGS Gross Margin Expenses Selling $1000 $617 $216 $167 $12000 $8000 $4000 Furniture Stores $5000 $3500 $1500 Hardware Stores $5000 $3100 $1900

Home Improvement Stores

$2000 $1400 $600

Advertising
Pkg & Delivery Warehousing Billing Total Expenses Net Income (Loss)

$750
$800 $400 $600 $3550 $450

$450
$370 $200 $300 $1937 ($437)

$150
$300 $150 $250 $1066 $834

$150
$130 $50 $50 $547 $53

Considerations in Marketing Control

Problems versus Symptoms

Data versus Information

Effectiveness versus Efficiency

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