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Three Elements of the Marketing Process as a Two-Factor Machine

Three Elements of the Marketing Process as a Two-Factor Machine. Ted Mitchell. A Basic Car. gasoline. gasoline. Strange looking Car. gasoline. gasoline. The Car’s Conversion Process miles per gallon. Miles Travelled. Miles Travelled. Miles Travelled.

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Three Elements of the Marketing Process as a Two-Factor Machine

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  1. Three Elements of the Marketing Process as a Two-Factor Machine Ted Mitchell

  2. A Basic Car gasoline gasoline Strange looking Car gasoline gasoline The Car’s Conversion Processmiles per gallon Miles Travelled Miles Travelled Miles Travelled

  3. Simple Models of A Car’s Performance as a Transportation Machine A better car and driver will get more miles for the same resources than a poorer car and driver.

  4. Simple Models of A Car’s Performance as a Transportation Machine A better car and driver will get more miles for the same resources than a poorer car and driver.

  5. A Basic Marketing Machine Number of servers hired Number of servers hired It looks like A Two-Factor marketing machine Number of servers hired Number of servers hired Marketing Machine Cups sold per server Profit from Cups of Coffee sold Profit from Cups of Coffee sold Profit from Cups of Coffee sold

  6. Simple Models of Marketing Machine Performance A better marketing manager and machine will generate more dollars of profits than an average marketing machine and manager

  7. Simple Models of Marketing Machine Performance A better marketing manager and machine will generate more dollars of profits than an average marketing machine and manager

  8. Called Two-Factor Machines • The amount of output from the machine, O • Is determined by Two Factors • Factor #1) the amount of Input the machine uses, I • Factor #2) the machine’s conversion rate or the efficiency of the machine’s ability to convert Inputs into Outputs, r = O/I

  9. Many Types of Inputs • Business Machines have many types of resources, investments and activities that can be considered Inputs for a marketing machine • The Inputs for Marketing machines have been classified as the 4 P’s of the marketing mix • Selling Price • Product/Service mix • Promotion/Communication mix (advertising, sales people, events) • Time and Place mix (hours of operation, location, furnishings)

  10. Many Types of Marketing Outputs • Marketing machines can be designed to produce many different types of outputs • Profit (Gross, Marketing Profit, Net Profit) • Sales revenue • Demand (quantity sold) • Market penetration • Customer Awareness • Customer Satisfaction

  11. Two-Factor Marketing Machines • Are business machines on training wheels • They deal with a single input and a single output. • Changes in the output are explicitly due to the changes in the amount of a single input and the machine’s conversion rate • All other marketing inputs are considered to be held constant when managing and evaluating a two-factor model of a marketing machine

  12. We use Two-Factor Models to • 1) Compare different marketing performances • 2) Forecast the amount of output to be expected if the quantity of input is changed or the efficiency of the conversion process is changed

  13. Comparing performances You need a benchmark performance for comparison

  14. Comparing performances Remember the assumption that other things in the marketing mix are kept constant or are not sufficiently important to worry about

  15. Comparing performances In a computer simulation it is easy to keep things constant. Make your initial performance the benchmark and only change one Input on a repeated plays of the same period

  16. Diagnoses of the Differences The differences in the two overall performances provide the basis for a diagnoses of the strategy change

  17. Diagnosing the difference • leads to forecasting the potential consequences of changes

  18. Forecasting the Amount of Output From a proposed change in Input

  19. Forecasting the Amount of Output From a proposed change in Input

  20. Forecasting the Amount of Output From a proposed change in Input

  21. Forecasting the Amount of Output From a proposed change in Input

  22. Because of the Many different potential decisions • That could be treated as marketing inputs • It is important to have an understanding of potential cause and effect found in the theory of marketing management

  23. Any Questions? • Is every one comfortable with • 1)the concept of the marketing process as a machine which converts the 4 P’s of marketing inputs into outputs of profits, revenues, etc.? • 2) The Two-Factor Marketing Machine Converts a single metric as an input into a single metric output!

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