Unit I Introduction to Marketing Finance This subject introduces the way in which financial analysis can be used in marketing,

and gives a brief overview of the areas in marketing where knowledge of finance can be very useful, particularly in helping marketers gauge how well strategy is working, in evaluating marketing research alternatives, developing future plans and in marketing control. Financial skills are critical in today's environment. Marketing professionals need to have the ability to analyze the projected Return on Invest (ROI) of a marketing endeavor to corporate decision makers. The understanding and Evaluate the cost/benefit trade off or a new project, this would include discounting back net present values of future projected cash inflows, and comparing the (NPV) to the marketing project's budgeted expenditure. The multiple channel options of advertising, public relations, digital media, and live events, there are endless means of creating connections and touch-points with customers. Unfortunately, a lack of communication between marketing and finance often stands in the way of maximizing the results of an integrated marketing strategy. Finance and Marketing can (and should) collaborate to drive higher bottom-line performance. Marketing and Finance Integration Marketing and finance departments in a company are generally at odds with each other due to their opposing orientations. But their qualities, when integrated, can be productive and greatly enhance value of the corporation. Financial input in marketing can create shareholder value and demonstrate how to achieve the required integration of the finance function with marketing for the successful modern business. The functions of these departments are as follows. Marketing function-To generate sales (revenue, income) to be used by finance department to meet costs, capital expenditure, service capital, strengthen firms financial position Finance Function -To ensure that a firm remains financially strong, solvent, liquid and profitable by employing its resources (raised/generated) efficiently, productively and profitably. Finance department is responsible for overall management of the finances of the company. It is concerned with budgeting, costing, risk diversification etc. Finance department has to see that money is being distributed properly. On the other hand, marketing department is responsible for realizing the wishes of the customers and then designing a product according to these needs so that customers are satisfied. Quite often, these functions run into problems and are unable to work to their full potential because of inherent relationship issues. The lack of co-operation soon becomes apparent when the team members work at cross purposes. Some of the conflicts that arise between these functions are addressed here. Objectives for learning marketing Finance Financial analysis can be used to serve many purposes in an organisation but in the area of marketing it has four main functions: a) b) c) d) to gauge how well marketing strategy is working (situation analysis) to evaluate marketing decision alternatives to develop plans for the future to control activities on a short term or-day to-day basis.

Importance of marketing finance knowledge to marketer For marketer it becomes necessary to coordinate their plans with functional areas like sales forecast, budgeting and estimating return from market initiative. It helps to understand rate of return on marketing investment & capital investment require to earn profit Cost benefit analysis Cost benefit analysis (CBA), sometimes called benefitcost analysis (BCA), is a systematic process for calculating and comparing benefits and costs of a project, decision or government policy (hereafter, "project"). CBA has two purposes: a) To determine if it is a sound investment/decision (justification/feasibility), b) To provide a basis for comparing projects. It involves comparing the total expected cost of each option against the total expected benefits, to see whether the benefits outweigh the costs, and by how much. CBA is related to, but distinct from cost-effectiveness analysis. In CBA, benefits and costs are expressed in monetary terms, and are adjusted for the time value of money, so that all flows of benefits and flows of project costs over time (which tend to occur at different points in time) are expressed on a common basis in terms of their "net present value.The marketing cost analysis looks into the costs and expenses incurred to achieve the sales volume and their justification. A cost analysis involves spreading the natural costs, allocating them to functional units, studying the profitability of the units, and implementing appropriate action depending on the findings of the analysis. Just as a sales audit examines the entire sales operations of a firm, a marketing audit evaluates and enhances the effectiveness of a firm's marketing operations by studying its marketing strategies, policies, and practices. Sales managers use profitability analysis to relate the sales revenues to marketing costs. This helps sales managers to take necessary measures to ensure higher profitability of the firm's sales transactions. A number of principles such as the iceberg principle, the 80/20 principle and cross-classifications guide sales managers in conducting effective sales and cost analysis. These principles reveal the behavior of sales data and the actual reasons underlying them. They forewarn sales managers of impending dangers and help them to take measures to counter them. Sales Analysis Control is one of the most critical functions performed by a sales manager as it measures the performance of the system and helps the manager take corrective action if the performance of the system is not in agreement with the formulated plans. The present day dynamic marketplace has forced sales managers to shift their focus in sales control from sales volume alone and to lay equal emphasis on costs incurred in implementing the sales effort. The objective of sales control is to ensure that the company's sales efforts are in tune with its sales plan by taking necessary measures in case of deviations. The sales control function measures the performance of the sales force and identifies the problems and opportunities that the firm is exposed to. The process of sales control involves setting goals, comparing actuals with the targets, and taking up corrective action if necessary. The sales efforts of a company can be studied through a sales analysis that involves gathering, classifying, comparing, and studying the sales data of the company.

A typical sales analysis involves deciding on the purpose of evaluation, comparing the sales figures with some standards and processing the data to generate reports. A sales analysis can be most informative when the sales data is broken down hierarchically. An analysis of volume of sales by categories is very helpful in identifying the root causes of the problems in the sales activities of the firm. Though a sales analysis helps identify the problems associated with the sales activities of the firm, it is also bound by a few limitations like dependency on accounting records, inability to reflect the profitability of sales, etc. Sales analysis involves analyzing the sales volume or the total sales of the company. It includes the total sales of the company by territory, customer, and product category. A sales audit is periodically taken up by the sales management to examine the entire selling operations of the firm. The audit involves an audit of the sales organization, the sales environment, planning systems, and sales management functions. While a sales analysis measures the sales volume achieved

Investment and decision making,

Impact of marketing investments on overall financial health Application of ROI to Marketing Investment.