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Topic Measuring Marketing Productivity

An important task of marketing is to assess the efficiency and effectiveness of marketing activities. Marketers increasingly are being held accountable for their investments and must be able to justify marketing expenditures to senior mgrs.

Measuring Marketing Plan Performance: -

4 tools are used to check on plan performance:

1.Sales Analysis
2.Market Share Analysis
3.Marketing expense to sales analysis
4.Financial analysis

1. SALES ANALYSIS: -

It consists of measuring and evaluating actual sales in relation to goals. Two specific tools are used in sales analysis: -

(a)Sales Variance Analysis
(b)Microsales analysis

(a) Sales Variance analysis: -
It measures the relative contribution of different factors to a gap in sales performance. Ex: -
Annual plan to sell 40 fridge, at RS 10000 therefore Total Revenue = 400000(for a quarter) Now,
At quarter end only 30 fridge get sold at RS 8000 therefore Total Revenue = 240000(for a quarter) We need to calculated the sales performance due to
-Volume decline
-Price decline
Therefore following calculations: -

Variance due to price decline = (10000-8000) (30)=60000 37.5% Variance due to volume decline=(10000)(40-30) =100000 62.5% 160000 100% Almost two third of the variance is due to failure to achieve the volume target. Therefore company should focus on the reasons why it failed to achieve the expected sales volume.

(b) Microsales Analysis: - This analysis looks at territory wise product that failed to produce expected sales.

TerritoryExpected sales Actual sales %
Territory 1 1500 units 1400 units7% shortfall
Territory 2500 units525 units5 % increase
Territory 32000 units1075 units 465 shortfall

Territory 3 is causing the maximum trouble .Therefore we need to check the reasons , which could be – -A major competitor has entered this territory
-Business is in recession in this territory .

2. MARKET SHARE ANALYSIS :-

The company’s does not reveal as to how well the company is doing to relative competitors . For this purpose the mgmt needs to track its market share . This can be measured in three ways :-
(a)Overall market share
(b)Served Market share
(c)Relative Market share

Overall Market share :- is the company’s sales expressed as a % of total market sales. Served Market share :- served market:- all buyers who are able & willing to buy its product . ( served mkt share is always larger than overall market share ) . Served Mkt share is thus the sales expressed as a % of the total sales to its served market . Relative Market share :- market share in relation to its largest competitor . relative mkt share over 100% indicated – mkt leader .

A useful way to analyse market share movements is in terms of 4 components :-

Overall market share =customer * customer * custome r * Price penetration loyalty selectivity selectivity

Customer penetration :- % of all customer who buy from the company . Customer loyalty:- purchases from the company by its customers expressed as - % of their total purchases from all suppliers of the same products. Customer selectivity:- size of the average customer purchase from the company expressed as - % of the size of the average customer purchase from an average company . Price selectivity:- average price charged by the company expressed as - % of the average price charged by all companies .

3. MARKETING EXPENSE-TO-SALES ANALYSIS :-

Annual plan control requires making sure that the company is not overspending to achieve sales goals . The key ratio to watch is marketing expense to sales ....
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