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Lecture

COSTS.docx

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Department
Marketing
Course
MKT 300
Professor
Cynthia Mason
Semester
Fall

Description
CMKT300 Crip Sheet Chau Le 2. Key internal business process measures: process outputs/ costs/ waste/ speed, process benchmarking, What is the primary role of marketing? To maximize process mapping shareholder value by delivering profitable growth and building 3. Customer outcome measures: customers image of brand equity. [Focus on profits before sales] company, customer satisfaction, customer retention, Marketing Metrics: Demand side. Supply side: Operations, customer acquisition, customer profitability Customer & Market Research, Logistics, Sales force, the trade, 4. Owner outcome measures: valuation of company, return on advertising agency, finance capital, cash flow, sales and profit growth Target Market Positioning: Four Ps of Marketing: Dashboard: Monitors performance through the desktop 1. Product: product variety, quality, design, features, brand presentation of key metrics. name, packaging, sizes, services, warranties, and returns. Value-based marketing: value is created when the financial 2. Price: list price, discounts, allowances, payment period, benefit of a strategic activity exceeds the costs. [The NPV credit terms, price protection. (discounted incremental cash flow from any marketing initiative) 3. Promotion: advertisement, personal selling, sales should be equal to or greater than the incremental investment promotion, and public relations. required for that initiative] 4. Place: channels, coverage, assortments, location, inventory, Discounted Cash Flow (DCF) Model: transportation, and logistics. Shareholder Value= PV of net or operating cash flows + PV of Metric: measuring system that quantifies a trend, dynamic or a residual value + Non-Operating Assets Market Value of Debt characteristic to: diagnose, explain, share & project, encourage What makes marketing effective? Effective marketing rigor & objectivity, compare observations, and facilitate contributes to enhance business performance (profitable growth) understanding & collaboration. by: Marketing Metric: measure of marketing performance that - Clarifying strategic intent. quantifies customer outcomes, business processes, learning and - Identifying all the marketing investment decisions a company change, and owner outcomes. makes. Why do marketers need metrics? Quantify market opportunities - Aligning the organization to deliver. & competitive threats, justify financial risks & benefits, evaluate - Measuring the degree to which those objectives are met plans & explain variances, judge & anticipate performance, and based on: Customer response (demand-side) and Financial respond proactively & leverage opportunities. performance (supply-side) What makes a good marketing metrics? [SMART] S- specific: Product Profitability. EBIT. NI. : clear and easily interpreted. M- Measurable: quantifiable/ Revenue Direct Variable Costs = Contribution Margin comparable. A- Attainable: achievable & reasonable. R- Realistic: Contribution Margin Direct Fixed Costs = Gross Profit/ Margin Gross Profit/ Margin Indirect Fixed Costs = Operating Income (EBIT) fits constraints/ cost-effective. T- Timely: doable. KPI: metric tied to a target - Benchmark: industry-based best EBIT Interest and Taxes = Net Income (NI) practice Operating leverage = CM/ EBIT Why is it important to manage costs? Two key facts about Target: desired performance/ result marketing cost management: Forecast: projected performance/ result - Proxy: reasonable estimate 1. Easier to control and manage the supply side (ex: costs and resources) than it is to control and manage consumer Balanced Scorecard: measures performance on a set of demand. [Consumer demand is influenced by external marketing metrics aligned to a companys long term strategic factors] objectives 2. Cost control is an important principle of marketing systems - Strategy is a planning tool which enables a company to link controls and its metrics. [Good marketing MUST consider its financial budgets with its strategic goals by connecting: Customer demand-side metrics (ex: customer cost and profit metrics and the bottom- line profitability implications] satisfaction) to owner supply-side metrics (ex: Variable Cost: a cost that varies directly with the quantity sold- shareholder value)) Key internal processes (ex: product development) that sometimes called direct costs. (Ex: direct materials used to manufacture/ make a product, direct labour used to manufacture/ drive demand and supply metrics make a product, sales commission, after-sales service, coupon/ Process learning that drives key internal processes and is influenced by demand and supply metrics rebate redemption, product packing and direct distribution, and import/ export duties). Translating vision and strategy: Fixed Cost: all costs other than variable costs which do not vary Objectives Measures Targets Initiatives - Financial: To succeed financially, how should we appear to with sales- often called overhead costs [Ex: management salaries, office rental, utilities, depreciation, market research studies, our shareholders? general marketing and advertising, sponsorship, PR, office - Internal Business Process: To satisfy our shareholders and customers, what business processes must we excel at? equipment, supplies] Sunk Costs: past costs- cannot affect future or current decisions - Learning and Growth: To achieve our vision, how will we because the amount of money has already been spent and cannot sustain our ability to improve? - Customer: To achieve our vision, how should we appear to change Common Costs: overhead or fixed costs that cannot be attributed our customers? to any specific product, segment, or line of business- will not Measuring and managing metrics: 1. Learning and change measures: corporate culture, change directly affect future or current decisions (will not change due to a change in business) management, employee morale, employee retention
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