Marketing Control

To deal with many surprises that occur

during the implementation of marketing
plans, the marketing department
continuously monitor and control
marketing activities
 Research Studies reveal
• Smaller companies do a poorer job of setting clear
objectives and establishing systems to measure
performance.
• less than half of the companies studied knew their individual
products’ profitability. About one third of them had no
regular review procedures for spotting and deleting weak
products.
• Almost half the companies fail to compare their prices with
those of their competition, to analyze their warehousing and
distribution costs, to analyze the causes of returned
merchandize, to conduct formal evaluations of advertising
effectiveness, and to review their sales force’s call reports.
• Many companies take four to eight weeks to develop
control reports, which are occasionally inaccurate.
 Marketing control
Marketing control may be defined as the
managerial function of monitoring and
feeding back of actual marketing performance
and its measurement and evaluation against
the planned performance standards so as to
identify the deviations and correct them as
they occur and provide inputs for plan
reformulation
 Importance of Marketing Control
• Detection of deviations
• Locate responsibility for employees
• Self examination by employees
• Match environmental changes
• Organizational complexity
• Assist plan reformulation
Characteristics of effective marketing
control system
• Match operational needs
• Ensure prompt detection of deviations
• It should be flexible
• It should match organizational pattern
• It should be economical
• It should be understandable
• It should trigger corrective action
 Types of marketing control

1. Annual Plan control

2. Profitability control
3. Efficiency control
4. Strategic control
 Annual Plan control
The purpose of annual plan control is to ensure that the company

achieves the sales, profits, and other goals established

in its annual plans.

The four steps involved are:

– Management sets monthly or quarterly goals.
– Management monitors its performance in the marketplace.
– Management determines the causes of serious performance
deviations.
– Management takes corrective action to close the gaps between the
goals and performance.
 The control process
What do we
want to Goal setting
achieve?

What is Performance
happening?
Measurement

Performance
Why is it
happening?

Diagnosis

What should
we do about it?
Corrective Action
Managers use five tools to check on Annual
plan performance: sales analysis, market
share analysis, marketing expense to sales
analysis, financial analysis, and market based
scorecard analysis.
 Sales Analysis

• Sales Analysis: consists of measuring and

evaluating actual sales in relation to sales
goals.
• Two specific tools are used in sales analysis:
– Sales Variance Analysis: measures the relative
contribution of different factors to a gap in sales
performance.
– Microsales Analysis: looks are specific products,
territories, and so on and so forth that failed to
produce expected sales
 Market Share Analysis
• Company sales do not reveal how well the company is
performing relative to the competitors. For this
purpose, management needs to track its market share.
• Market share can be measured in three ways:
– Overall market share is the company’s sales expressed as a
percentage of total market sales.
– Served market share is its sales expressed as a percentage
of the total sales to its served markets. Its served market is
all the buyers who are willing and able to buy its products.
Served market share is always larger than overall market
share.
– Relative market share can be expressed as a market share
in relation to its largest competitor. A rise in relative
market share means that the company is gaining on its
competitor.
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.
This ratio consists of five components:
– Advertising to sales
– Sales-promotion to sales
– Marketing research to sales
– Sales administration to sales
– Sales force to sales

• The period to period fluctuations in each ratio can be tracked on a

control chart. The behaviour of successive observations even within
the upper and lower control limits should be watched.
Financial Analysis
 Market Based Scorecard Analysis:
Customer-Performance scorecard-
customer based measures are recorded
– New Customers
– Dissatisfied customers
– Lost customers
– Target market awareness
– Target market preference
– Relative product quality
– Relative service quality
Stakeholder performance Scorecard-
Companies track the satisfaction of various constituents who have a
critical interest in and impact on the companys performance : employees ,
suppliers, banks, distribution, retailers , stockholders. Again the norm
should be set fro each group and mgt should take action when one or
more groups register increased level of dissatisfaction
 Profitability Control
• Profitability needs to be judged on
– Products
– Territories
– Customer groups
– Segments
– Trade channels
– Order sizes
• This information will help the mgt to determine
whether any product or marketing activities
should be expanded, reduced or eliminated.
 Marketing Profitability Analysis:
Steps:
1. From P&L statement, find out the marketing related expenses

Sales $60,000

Cost of goods sold 39,000

Gross margin $21,000

Expenses

Salaries $9,300

Rent 3,000

Supplies 3,500

15,800
Net profit $5,200
2. Identify Functional expenses like sales/ advt./packing and
delivery and divide the expenditure under these heads

Natural Packing and Billing &

Accounts Total Selling Advertising Delivery Collecting
Salaries $9,300 $5,100 $1,200 $1,400 $1,600

Rent 3,000 — 400 2,000 600

Supplies 3,500 400 1,500 1,400 200

$15,800 $5,500 $3,100 $4,800 $2,400

3. Measure how much of each functional expense like selling etc.
was attributed from each channel and finding cost/unit of item
sold.
Sales call made by each channel

Packing and Billing and

Channel Type Selling Advertising Delivery Collecting
Hardware stores
200 50 50 50
Garden Supply shops
65 20 21 21
Department stores
10 30 9 9

275 100 80 80
Functional expense
$5,500 $3,100 $4,800 $2,400
÷ No. of Units
275 100 80 80
Equals
$ 20 $ 31 $ 60 $ 30
 4. Make a P&L for every channel and find out which
channel is most profitable
Whole
Hardware Garden Supply Dept. Stores Company
Sales $30,000 $10,000 $20,000 $60,000

Cost of goods sold 19,500 6,500 13,000 39,000

Gross margin $10,500 $ 3,500 $ 7,000 $21,000

Expenses

Selling ($20 per call) $ 4,000 $ 1,300 $ 200 $ 5,500

Advertising ($31 per

advertisement) 1,550 620 930 3,100

Packing and delivery ($60 per

order) 3000 1260 540 4800

Billing ($30 per order) 1500 630 270 2400

Total expenses 10,050 3810 1940 2400

Net profit or loss $450 $(310) $5060 $5200

• Determining Corrective Actions:

Marketing profitability analysis indicates the

relative profitability of the different channels,
products, territories or other marketing
analysis. It doesn’t prove best course of
action. It only opens a door to evaluate
options.
 Efficiency Control
Measuring Sales Force Efficiency
Sales manager should measure the efficiency in their
territory based on following indicators
• Avg. no. of calls per day
• Avg. call time
• Avg. revenue per call
• %age of orders per 100 sales calls
• No. of new customers per period
• No. of lost customers per period
• Sales force cost as % age of total sales
• Entertainment cost per sales call
 Advertising. Efficiency:
• Advertising Cost per 1000 target buyers reached
by media vehicles
• Percentage of audience who noted, saw or
associated, and read most of each print ad
• Consumer opinions on the ad’s content and
effectiveness
• Before and after measures of attitudes towards
product
• No. of enquiries stimulated by the ad
• Cost per enquiry
Sales Promotion efficiency:
• Percentage of sales sold on deal
• Display costs per sales dollar
• Percentage of Coupons redeemed
• No. of enquiries resulting from a demo.
Distribution efficiency:
• Search for economies in
– Inventory Control
– Warehouse locations
– Transportation Modes
 Strategic Control
Critical review of overall marketing goals
and effectiveness
Marketing effectiveness review
• The top management must review the annual
business plans.
• It should identify the strong and weak divisions
• However, the evaluation should not bee done just
on the basis of sales growth or market share
• Should consider the fact that a good leadership
may also not be able to do well. If the market itself
is Not right.
• Marketing audit
It is comprehensive, systematic, independent, and
periodic examination of a company’s or business units’ –
marketing environment, objectives, strategies, and
activities with a view to determining problem areas, and
opportunities and recommending a plan of action to
improve company’s marketing performance.

characteristics of marketing audit:

Comprehensive- effective in locating real source of
marketing problems
Systematic
Independent
Periodic