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The Basic Marketing Statement

The Basic Marketing Statement. Ted Mitchell. A Marketing Performance Statement. Is an Accounting style report that is used to summarize the performance of the Marketing Efforts in a Business It is created using a modified income or operating statement found in accounting

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The Basic Marketing Statement

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  1. The Basic Marketing Statement Ted Mitchell

  2. A Marketing Performance Statement • Is an Accounting style report that is used to summarize the performance of the Marketing Efforts in a Business • It is created using a modified income or operating statement found in accounting • It is designed to reflect the effects of your decisions on demand, revenues and marketing profits

  3. Marketing Performance is • Measured first and foremost in terms of customer demand (quantity sold), Sales Revenue, Gross Profit and Marketing Profit • Other metrics of performance such as customer awareness, customer satisfaction, customer retention, market share, switching rates, return rates, etc. are secondary to the overarching goal of profit

  4. Primary Measures of Marketing Performance Each Week in Biz-Cafe

  5. Timing is Important • Some Are Strategic and Sunk, Single Shot, expenses that have big impact • Location, size of coffee machine, type of furnishings • Not Useful for immediate performance metrics • Some are Monthly expenses and too late for weekly decision making

  6. Many Decisions • Such as the number of mangers, the amount the managers are paid, and the choice of market research are important strategic decisions and important overhead costs but they do not have a direct or immediate impact of the day to day demand for coffee. • Marketing Statements focus on the decisions that have a direct and immediate effect on customer demand

  7. The Marketing Decisions • That impact the immediate customer demand are called the 4P’s of marketing • Product • Place • Promotion • Price

  8. Decision Inputs Immediately Impacting Marketing Performance Each Week

  9. Converting the Marketing Decisions and the measures of the output into a Statement of Marketing Performance

  10. WEEKLY Marketing Performance Statement For A Single product

  11. Words make A Difference • Gross Profit • Gross Margin • Unit Margin • Dollar Markup per Unit • Dollar Profit per Unit • Net Margin • Net Profit • Net Profit Margin • Return on Sales • Marginal Return

  12. We will try to avoid the word margin • Gross Profit • Dollar Markup or Dollar Profit per Unit • Net Profit • Marketing Profit

  13. Marketing Contribution • The contribution marketing makes to cover the non-marketing costs or general operating costs of the business. • Operating Expenses or Overheads • Market Research & Product Development (R&D) • Administration & staff salaries, Info Systems • General Overheads e.g., offices, telephones

  14. Marketing Contribution • Marketing Contribution to the Operation’s Net Profit, MC • Often called the Profit after Promotion Expenses Are Subtracted From Gross Profit

  15. Marketing Contribution to Profit • Contribution that Marketing makes to cover general administrative, research and development costs. • On the Operating Statement it is the profit after expenses for the period’s marketing effort (all 4 P’s) are subtracted but before the general overhead and administration, research and development expenses are deducted.

  16. WEEKLY Marketing Statement For A Single product

  17. There are Three Basic • Performance Ratios (Conversion rates, Efficiency metrics) normally included • 1) Markup on Price, Mp = (P-V)/Por Gross Return on Sales, GROS= G/R • 2) Marketing Profit Returned on SalesMROS = Z/R3) Mktng Profit Returned on Marketing Expense or Investment, ROME = Z/E

  18. Marketing Statement as the Basic Profit Equation • Z = P(Q)-V(Q) –Promotion –Service where • Z = marketing profit • P = selling price per unit • V = variable cost per unit • Q = quantity sold • Promotion and Advertising Expense • Server or Sales Force Expense

  19. Operating Statement is Profit Equation Simplified Version of • Z = P(Q)-V(Q) –Promotion - Servers is • Z = R - CoGS - F where • R = PQ = revenue • CoCS = VQ = total variable cost • F = total fixed marketing costs for the period

  20. Strongly Recommend the Use of a Spread Sheet for recording decisions and results from period to period.

  21. Want to compare • 1) Week to Week Performances • 2) Week to Average Weekly Performance • 3) Identify the Differences in Importance • 4) Relative Importance of Differences • 5) Identify Important Differences to be explored in more detail • 6) Identify Trends

  22. Remember • The Marketing Performance Statement carries key information on the impact of all four P’s of marketing. • The Marketing Performance Statement answers the common questions asked by your boss

  23. Exercise • Make a basic Marketing Performance Statement for your market performance in Biz-Cafe

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