Session 6 MG 220 Marketing Management MBA 10

1. Part 2: Capturing Market Insights > Measuring Marketing Productivity > Forecasting and Demand Measurement Class Presentation | Session 6 | 2 Sep 2010

2. Measuring Marketing ProductivityConcept Accountability of Marketing programs & Marketing Management Marketers should: Be able to justify the marketing expenditures understand and analyze “financials” of their activities Review and analyze all kind of financial data particularly related to their activities MG 220 Marketing Management 2

3. Measuring Marketing ProductivityApproaches 2 Key Approaches: Marketing Metrics Marketing-Mix Modeling MG 220 Marketing Management 3

4. Measuring Marketing ProductivityMarketing Metrics Marketing Metrics is the set of measures that helps firms to quantify, compare and interpret their marketing performance Used by marketers to design programs Used by top management to decide on allocations MG 220 Marketing Management 4

5. Measuring Marketing ProductivityMeasuring Marketing Plan Performance Four key tools used: Sales Analysis Market Share Analysis Marketing Expense-to-sales Analysis Financial Analysis MG 220 Marketing Management 5

6. Measuring Marketing ProductivityMeasuring Marketing Plan Performance 1. SALES ANALYSIS Consists of measuring and evaluating actual sales in relation to goals Sales Variance Analysis measures relative contribution of different factors to a gap in sales performance Microsales Analysis looks at specific products, territories that failed to produce results MG 220 Marketing Management 6

7. Measuring Marketing ProductivityMeasuring Marketing Plan Performance 2. MARKET SHARE ANALYSIS How well company is performing compared to competitors Overall Market Share is the company’s sales expressed as a percentage of total market sales Served Market Share is the company’s sales expressed as a percentage of total sales in served market Served Market: All buyers and who are able and willing to buy its product (generally a part of total market, because this is only for company’s product) Served Market Share is always greater than Overall MG 220 Marketing Management 7

8. Measuring Marketing ProductivityMeasuring Marketing Plan Performance 2. MARKET SHARE ANALYSIS (…contd) Relative Market Share is the company’s market share compared to its largest competitor If <100: company is follower If 100: tie as market leader If >100: company is market leader Limitations in Market Share Analysis Outside factors affect everyone equally? Company’s performance against overall average of its competitors New firm entering => dec. in market share (its not bad performance) If market share is engineered to focus away from unprofitable segments anomalies MG 220 Marketing Management 8

9. Measuring Marketing ProductivityMeasuring Marketing Plan Performance 3. MARKETING EXPENSE-TO-SALES ANALYSIS Key ratio to be analyzed Very important to see its variance, cause and effect etc. MG 220 Marketing Management 9

10. Measuring Marketing ProductivityMeasuring Marketing Plan Performance 4. Financial Analysis Financial ratios should be reviewed to understand where the performance is coming from MG 220 Marketing Management 10

11. Measuring Marketing ProductivityMarketing-Mix Modeling See the 4Ps Financially Review all data related to 4Ps and understand effects of different marketing activities Non-financial activity to be done primarily by marketing team MG 220 Marketing Management 11

12. Forecasting and Demand Measurement One of the major objectives of Marketing research Marketing’s tasks to identify opportunities and also give measured forecasts MG 220 Marketing Management 12

13. Forecasting and Demand MeasurementThe Measures of Market Demand 90 types of Demand MG 220 Marketing Management 13

14. Forecasting and Demand MeasurementThe Measures of Market Demand Different ways of looking at “market” Potential Market Set of consumers who profess a sufficient level of interest in a market offer (able to buy?) Available Market Set of consumers who have interest, income and access to a particular offer. (Qualified Available Market => Eligible or allowed) Target Market Part of Qualified Available market, the company decides to pursue (most attractive segment) Penetrated Market Set of consumers who are buying the company’s products MG 220 Marketing Management 14

15. Forecasting and Demand MeasurementVocabulary for Demand Measurement Market Demand: For a product is the total volume that would be bought: - by a defined customer group - in a defined geographical area - in a defined time period - in a defined marketing environment - under a defined marketing program It is not a number but a function (correlation) of stated conditions MG 220 Marketing Management 15

16. Forecasting and Demand MeasurementVocabulary for Demand Measurement Market Demand: MG 220 Marketing Management 16

17. Forecasting and Demand MeasurementVocabulary for Demand Measurement Market Demand: MG 220 Marketing Management 17

18. Forecasting and Demand MeasurementVocabulary for Demand Measurement Market Demand: Market Minimum Market Potential Marketing Sensitivity of Demand (Demand’s reaction to marketing effort) Expansible market (demand reacts highly to marketing) Non-expansible market (demand reacts less to marketing) Market Penetration Index (current level of market demand to potential demand) Share Penetration Index (current level of market to its potential market share) MG 220 Marketing Management 18

19. Forecasting and Demand MeasurementVocabulary for Demand Measurement Market Forecast: Only one level of expenditure is possible (or practically done) Market demand corresponding to that level is Market Forecast MG 220 Marketing Management 19

20. Forecasting and Demand MeasurementVocabulary for Demand Measurement Market Potential: Market forecast shows demand at a limited level only Market Potential is the limit approached by market demand as industry marketing expenditures approach infinity for a given marketing environment. Market Demand with maximum possible marketing expenditure MG 220 Marketing Management 20

21. Forecasting and Demand MeasurementVocabulary for Demand Measurement Company Demand: Company’s estimated share of market demand at alternative levels of company marketing effort in a given time period Relating demand to competitors, company’s image etc. MG 220 Marketing Management 21

22. Forecasting and Demand MeasurementVocabulary for Demand Measurement Company Sales Forecast: After understanding company demand, Choose a level of marketing effort Company sales forecast is the expected level of company sales based on a chosen marketing plan and an assumed marketing environment. Based on this: Sales Quota is the sales goal set for a product line, company division. Assigned to: stimulate sales effortsGenerally higher than Sales Forecast Sales Budget is conservative estimate of expected volume of sales and is used for internal decisions like purchasing, cash flow etc.Generally lower than Sales Forecast MG 220 Marketing Management 22

23. Forecasting and Demand MeasurementVocabulary for Demand Measurement Company Sales Potential: Company sales potential is the sales limit approached by company demand as company marketing effort increases relative to that of competitors MG 220 Marketing Management 23

24. Forecasting and Demand MeasurementEstimating Current Demand Total Market Potential Estimate: Potential number of buyers X average quantity purchase by a buyer X price Area Market Potential Problem of selecting best territories and allocating marketing budgets Industry Sales and Market Shares Identifying industry and competitors’ sales figures MG 220 Marketing Management 24

25. Forecasting and Demand MeasurementEstimating Future Demand Three-stage procedure Macroeconomic forecast Industry forecast (based on Sr. 1) Company sales forecast (based on Sr. 2) How to? And information Bases What People Say Survey Consumers Salesforce opinions Experts’ (distributors, retailers, consultants) opinions What People Have Done Past-Sales Analysis What People Do Test-Marketing MG 220 Marketing Management 25

26. QUIZ # 1 | 30 Aug 2010 RESULTS MG 220 Marketing Management 26

27. Part 3: Connecting with Customers > Intro to Part 3 Class Presentation | Session 7 | 6 Sep 2010

28. Part 3: Connecting with CustomersAn intro and overview Chap 5: Creating Customer Value, Satisfaction, and Loyalty Chap 6: Analyzing Consumer Markets Chap 7: Analyzing Business Markets Chap 8: Identifying Market Segments and Targets MG 220 Marketing Management 28

29. Part 3: Connecting with Customers > Building Customer Value, Satisfaction and Loyalty > Maximizing Customer Lifetime Value > Cultivating Customer Relationships > Customer Databases and Database Marketing Class Presentation | Session 7 | 6 Sep 2010