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Marketing Strategy Reformulation: The Control Process

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9 CHAPTER Marketing Strategy Reformulation: The Control Process * Source: Kent B. Monroe, Pricing: Making Profitable Decisions, 3rd ed. (Burr Ridge, IL; McGraw Hill ... – PowerPoint PPT presentation

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Title: Marketing Strategy Reformulation: The Control Process


1
9
CHAPTER
Marketing Strategy Reformulation The Control
Process
2
AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO
  1. Define the concept of strategic control.
  1. Describe the nature and sources of strategic
    change.
  1. Explain each element of operations control.
  1. Discuss the nature of marketing costs analysis
    and the issues involved.

3
AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO
  1. Describe offering mix analysis and its two
    interrelated tasks.
  1. Discuss sales and marketing channels analyses and
    their impact on the firm.
  1. Explain three considerations involved in
    strategic and operations control.

4
THE MARKETING STRATEGY CONTROL PROCESS
The marketing control process serves as the
mechanism for achieving
  • Strategic adaptation to environmental change
  • Operational adaptation to productivity needs

Strategic Control
Doing the right things
Operations Control
Doing things right
5
THE MARKETING STRATEGY CONTROL PROCESS
Strategic Control
  • Assesses the direction of the organization as
    evidenced by its
  • Implicit or explicit goals and strategies
  • Capacity to perform in the context of changing
    environments and competitive actions
  • Defines the fit between an organizations
    capabilities and objectives and environmental
    threats and opportunities

6
THE MARKETING STRATEGY CONTROL PROCESS
Operations Control
  • Assesses how well the firm performs marketing
    activities as it seeks to achieve planned outcomes
  • Assumes that
  • The direction of the firm is correct
  • Only the organizations ability to perform
    specific tasks needs to be improved

7
THE MARKETING STRATEGY CONTROL PROCESS
  • A poorly executed plan can produce undesirable
    results just as easily as a poorly conceived
    plan.
  • Remedial efforts should focus on

8
CHAPTER 9 MARKETING STRATEGY REFORMULATIONTHE
CONTROL PROCESS
STRATEGIC CHANGE
9
STRATEGIC CHANGE
  • Is the change in the environment that will affect
    the long-run well-being of the organization
  • Represents opportunities or threats to an
    organization, depending on its competitive posture
  • Example The aging of the U.S. population

10
STRATEGIC CHANGE SOURCES
11
STRATEGIC CHANGE THREAT OR OPPORTUNITY?
  • The organizations business definition determines
    the threat severity or opportunity potential
  • Ask the following questions Does the threat or
    opportunity relate to
  • The types of customers served?
  • The needs of these customers?
  • The means by which these needs are satisfied?

12
OPTIONS FOR DEALING WITH STRATEGIC CHANGE
  • Collect the resources necessary to alter the
    firms technical and marketing capabilities to
    fit its market-success requirements
  • Shift emphasis to product markets where the match
    between success requirements and the firms
    distinctive competency is clear
  • Cut back efforts in those product markets where
    the firm has been outflanked
  • Leave the industry

13
CHAPTER 9 MARKETING STRATEGY REFORMULATIONTHE
CONTROL PROCESS
OPERATIONS CONTROL
14
OPERATIONS CONTROL
  • The goal of operations control is to improve the
    productivity of marketing efforts
  • Ways to identify and allocate costs are

Marketing-Cost Analysis
Marketing Channel Analysis
Sales Analysis
Customer Profitability Analysis
Product-Service Mix Analysis
15
OPERATIONS CONTROL
Marketing-Cost Analysis
Its purpose is to
  • Trace, assign, or allocate costs to a specified
    marketing activity (hereafter referred to as a
    segment).
  • Accurately display the financial contribution of
    activities or entities to the organization

16
OPERATIONS CONTROL
Marketing-Cost Analysis
  • Marketing segments are typically defined based on

Product-Service Offering Elements
Marketing Channels
Sales Divisions or Territories
Customer Type or Size
  • Cost allocation principle Some costs are
    directly or indirectly traceable or assignable to
    every market segment

17
OPERATIONS CONTROL
Marketing-Cost Analysis
Cost allocation issues
  1. How should costs be allocated to separate
    segments?
  1. What costs should be allocated?
  1. Those costs that
  • Arise from the performance of a marketing activity
  • Charged to that activity based on administrative
    policy

18
OPERATIONS CONTROL
Marketing-Cost Analysis
Cost allocation issues
  1. Should all costs be allocated to market segments?
  1. It depends
  • Allocate costs if Opting for a whole equals the
    sum of parts income statement??
  • Do not allocate if certain costs
  • Have no identifiable measure of application to a
    segment
  • Do not arise from one particular segment

19
OPERATIONS CONTROL
Marketing-Cost Analysis
Guidelines when considering cost allocation
  • Maintain distinctions between cost behavior
    patterns (fixed, variable, mixed)
  • The more joint costs there are, the less exact
    cost allocations will be
  • Greater detail in cost allocation or traceability
    will provide more useful info for remedial action

20
OPERATIONS CONTROL
Product-Service Mix Analysis
This analysis involves two interrelated tasks
  • Assess the performance of offerings in relevant
    markets

Sales Volume Analysis
Market Share Analysis
  • Appraise the financial worth of offerings via

Contribution Margin Approach
21
OPERATIONS CONTROL
Product-Service Mix Analysis
Sales Volume Analysis
Is a performance index that can be based on
Growth or Decline in Unit Sales Volume
A quantitative indicator of the acceptance of
offerings in their relevant markets
Proportion of Sales from Each Offering
8020 rule80 percent of sales or profits come
from 20 percent of the firms offerings
22
OPERATIONS CONTROL
Product-Service Mix Analysis
Market Share Analysis
  • Complements sales volume as a performance measure
  • Indicates whether a firm is gaining or losing
    ground in comparison with competitors
  • Can be computed by geographic area, offering or
    model, customer or channel

23
OPERATIONS CONTROL
Product-Service Mix Analysis
Market Share Analysis
  • Can lead to misleading results, such as having a
    high market share in a market whose overall sales
    may be declining or growing
  • Use unit rather than dollar volume in examining
    market share due to price differentials??

24
OPERATIONS CONTROL
Product-Service Mix Analysis
Contribution Margin Approach
  • Assign/trace costs to an offering that reflects
    its profitability
  • Requires astute managerial judgment
  • Can be illusive based on the offerings definition
  • Use the contribution margin approach to examine
    the financial worth of offerings
  • Charge relevant direct/assignable overhead costs
    to the offering
  • Break down the costs by those units that
    contribute to the analysis

25
EXHIBIT 9.1 DISAGGREGATING SERVICE STATION COSTS
FOR PRODUCT-SERVICE MIX ANALYSIS (000)
Department
Gasoline
General Merchandise
Automobile
Total
26
OPERATIONS CONTROL
Sales Analysis
Its purpose is to direct attention to both the
27
OPERATIONS CONTROL
Sales Analysis
  • Is based on a performance assessment by

Product-Service Offerings
Sales Divisions or Territories
Customer Type or Size
  • Measures to assess sales performance include
  • Sales revenue
  • Penetration of accounts in a sales territory
  • Gross profit
  • Selling and sales administration expenses
  • Sales call frequency

28
EXHIBIT 9.2 PERFORMANCE SUMMARY FOR TWO SALES
REPRESENTATIVES
29
EXHIBIT 9.3 SELECTED OPERATING INDICES OF SALES
PERFORMANCE
30
OPERATIONS CONTROL
Marketing Channel Analysis
Consists of two complementary processes
  • Assess environmental and organizational factors
    that may alter the structure, conduct, and
    performance of marketing channels
  • Evaluate the profitability of marketing channels

31
OPERATIONS CONTROL
Marketing Channel Analysis
Two types of costs to identify and trace to
marketing channels
32
EXHIBIT 9.4 DISAGGREGATED COSTS OF FURNITURE
IMPROVEMENT PRODUCTS FOR MARKETING CHANNEL
ANALYSIS (000)
Marketing Channel
Home Improvement Stores
Hardware Stores
Furniture Stores
Total
33
OPERATIONS CONTROL
Customer Profitability Analysis
A profitable customer is a person, household, or
company that, over time, yields a revenue stream
that exceeds, by an acceptable amount, the
organizations cost of attracting, selling, and
servicing that customer.
34
OPERATIONS CONTROL
Customer Profitability Analysis
Is calculated as follows
35
OPERATIONS CONTROL
Customer Profitability Analysis
  • When this is done for each customer, t is
    possible to classify customers into different
    profit tiers
  • Can cross-sell customers additional offerings
  • Can up-sell customers by introducing them to the
    firms more profitable offerings

36
OPERATIONS CONTROL
Customer Profitability Analysis
To manage low profit or unprofitable customers,
marketers could
  • Drop them to eliminate their costs entirely
  • Charge them higher prices/fees to increase profits
  • Reduce the cost of serving them to make them more
    profitable

37
CHAPTER 9 MARKETING STRATEGY REFORMULATIONTHE
CONTROL PROCESS
CONSIDERATIONS IN MARKETING CONTROL
38
CONSIDERATIONS IN MARKETING CONTROL
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