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The Relationship Between
Marketing and Accounting
Management
Chapter 10
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix
Slides prepared by Joe Rosagrata
Evaluating marketing
activities
 Marketers need to assess and
measure their marketing activities;
only by knowing how well their
strategies are performing can they
make adjustments and corrections as
they are needed.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix
Slides prepared by Joe Rosagrata
10-1
The marketing audit
 A Marketing Audit is a comprehensive
review and evaluation of the marketing
function in an organisation
 Marketing environment audit
 Marketing strategy audit
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix
Slides prepared by Joe Rosagrata
10-2
The marketing audit (cont.)
 Marketing structure audit
 Marketing systems audit
 Marketing productivity audit
 Marketing functions audit
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix
Slides prepared by Joe Rosagrata
10-3
Marketing audit rewards
 Marketers can identify problem areas
 Keep abreast of changing marketing
environment
 Capitalise on its strong points
 Spot lack of coordination in the marketing
program
 Allows marketers to determine performance
factors
 Anticipates future situations
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix
Slides prepared by Joe Rosagrata
10-4
Budgeting and controlling
marketing programs
 The budget quantifies the marketing plan
 Results achieved are compared to the
budget
 Variances are then analysed for appropriate
corrective action
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix
Slides prepared by Joe Rosagrata
10-5
The benefits of budgeting
 Encourages a focus on the future
 Measurable standards for performance,
related back to marketing objectives
 Forces a reconciliation of marketing goals
 Makes goals ‘real’
 Assists departments to cooperate
 Allows for consistency
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix
Slides prepared by Joe Rosagrata
10-6
The budgeting process
 Sales budget
 Sales forecasts; bottom-up and
top-down budgeting
 The production budget
 The marketing expense budget
 Marketing expenditure may not produce
sales and sales results are difficult to
forecast exactly
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix
Slides prepared by Joe Rosagrata
10-7
Fixed, flexible and zerobased budgets
 Fixed budgets are prepared for one level
of activity
 Flexible budgets are prepared on the
basis that activity levels may change
 Zero-based budgeting starts each new
budget period with a blank page
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix
Slides prepared by Joe Rosagrata
10-8
Non-financial marketing
controls

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
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
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Market share – ‘budget’
Number of new products developed
Strength of brand equity
Product complaints received
Price independence
Weighted distribution achieved
Attitudes towards our brand
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix
Slides prepared by Joe Rosagrata
10-9
Misdirected marketing
effort
 The 80-20 principle (pareto) 80% of
the orders, customers, territories or
products contribute only 20% of sales
or profit, while 20% of these selling
units account for 80% of the volume
or profit
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix
Slides prepared by Joe Rosagrata
10-10
Misdirected marketing
effort (cont.)
 The ‘iceberg principle’ only a small part of
an iceberg is visible above the water, and
the submerged 90% is the dangerous part
 Misplaced marketing effort–inadequate
knowledge of the exact nature of marketing
costs
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix
Slides prepared by Joe Rosagrata
10-11
The evaluation process
 Finding out what happened
 Finding out why it happened
 Decide what to do about it
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix
Slides prepared by Joe Rosagrata
10-12
Sales volume analysis
 A sales-volume analysis is a detailed
study of the net sales section of a
company’s profit and loss
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix
Slides prepared by Joe Rosagrata
10-13
Market share & cost
analysis
 A market share analysis is used to compare
its sales with those of the industry.
 Marketing cost analysis is used to
determine the relative profitability of its
territories, product lines or other marketing
units
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix
Slides prepared by Joe Rosagrata
10-14
Analysis of activity expenses
– costs by product or market
 Marketing costs should be allocated among
the various marketing activities, such as
advertising or warehousing, for more
effective ledger expense control
 Marketing cost analysis is a study of the
costs and profitability of a product range or
segment
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix
Slides prepared by Joe Rosagrata
10-15
Full-cost versus
contribution- margin
approach
 Operating costs can be divided into direct
and indirect expenses. Direct expenses
(separable expenses) are those incurred
totally in connection with one market
segment or one unit of the sales
organisation
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix
Slides prepared by Joe Rosagrata
10-16
Full-cost versus
contribution- margin
approach (cont.)
 Proponents of the full-cost approach
contend that a marketing-cost study is
intended to determine the net profitability
of the units being studied
 Contribution-margin supporters contend
that it is not possible to accurately allocate
indirect costs among product or market
segments
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix
Slides prepared by Joe Rosagrata
10-17
Taking corrective action
 Territory decisions
 Product decisions
 Customer and order-size decisions
 KPI’s – accounting reports can be used to
measure specific aspects of marketing
performance
 The first line in a Profit and Loss statement
records the gross sales-the total amount
sold by the company
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix
Slides prepared by Joe Rosagrata
10-18
KPI’s
 Net sales–represents the net amount of
sales revenue
 Cost of goods sold (cogs)–net sales less
cost of products = net profit
 Gross profit–Net sales less cogs
 Expenses–marketing, admin and misc
expenses
 Net profit–difference between gross
margin and total expenses
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix
Slides prepared by Joe Rosagrata
10-19
Mark-up and gross margin
 Mark-up percentage
• Mark-up % = dollar
mark-up
cost
 Gross margin
• Mark-up % = dollar
mark-up
selling price
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix
Slides prepared by Joe Rosagrata
10-20
Analytical ratios
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Financial ratio analysis
Gross margin percentage
Net profit percentage
Expense to sales ratio
Stock turn rate
Markdown percentage
Average collection period
Return on investment (ROI)
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix
Slides prepared by Joe Rosagrata
10-21