Ch15 eval strategy perform

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.
Step 1: Financial & Productivity Growth Goals 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.
Step 1: Financial & Productivity Growth Goals 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 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
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 Manage Organizational Change Human Capital Enhance Our People Information Capital Integrate Key Technologies Organizational Capital 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
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.
Fig. 15.2

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Ch15 eval strategy perform