Market-Based Management

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Market-Based Management
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What typifies successful businesses?

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Success/Profitability Drivers

• 1. Market attractiveness
• 2. Competitive advantage
• 3. Market orientation

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Profitability
Customer Satisfaction Retention
Market-Based Strategy Strategy Implementation
Market Orientation of a Business
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Marketing Orientation Requires

• Market-based organizational structure
• Market-oriented employees
• Market-oriented culture
• Market-based management systems

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A Market-Based Management System...

• Tracks and communicates both internal and
  external market performance metrics.
• Measures market-level profitability.

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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

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Internal Performance Metrics

• Sales
• ROI
• Net profits

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Market-Level Profitability

• How do marketing expenses impact a firms
  profitability?
• Net Marketing Contribution (NMC)

Market Demand
Market Share
Price/ Variable Cost/ Unit Unit
Marketing Expenses
-
x
x
-
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Impact of NMC on net profit.

• Net Profit

Operating Expenses
Overhead Expenses
-
NMC
-
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Breakdown of NMC Formula

• Market x Market x (Price/unit - VC/unit) -
  Mkt Expenses Demand ShareMkt Demand (in
  units) x Mkt Share Sales volume in unitsSales
  vol. in units x Price/unit Sales volume in
  dollarsPrice/unit - VC/unit Contribution
  margin (CM)Price/unit x margin Contribution
  margin/unitPrice/unit - contribution
  margin/unit Variable cost/unit

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Impact of NMC on Marketing Strategy...

Market Demand
Market Share
Price/ Variable Cost/ Unit Unit
Marketing Expenses
-
x
x
-