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CHAPTER 9 Marketing Strategy Reformulation: The Control Process © 2013 Pearson Education, Inc. publishing as Prentice Hall Slide 9-1 AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO: 1. Define the concept of strategic control. 2. Describe the nature and sources of strategic change. 3. Explain each element of operations control. 4. Discuss the nature of marketing costs analysis and the issues involved. © 2013 Pearson Education, Inc. publishing as Prentice Hall Slide 9-2 AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO: 5. Describe offering mix analysis and its two interrelated tasks. 6. Discuss sales and marketing channels analyses and their impact on the firm. 7. Explain three considerations involved in strategic and operations control. © 2013 Pearson Education, Inc. publishing as Prentice Hall Slide 9-3 Marketing Control Set marketing goals Measures performance Evaluates causes of differences Take corrective actions 2- 4 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Measuring and Managing Return on Marketing Investment Return on marketing investment (marketing ROI) is the net return from a marketing investment divided by the costs of the marketing investment. 2- 5 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Return on Marketing Investment 2- 6 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall THE MARKETING STRATEGY CONTROL PROCESS The marketing control process serves as the mechanism for achieving: Strategic adaptation to environmental change Operational adaptation to productivity needs Strategic Control Operations Control “Doing the right things” “Doing things right” © 2013 Pearson Education, Inc. publishing as Prentice Hall Slide 9-7 THE MARKETING STRATEGY CONTROL PROCESS Strategic Control Assesses the direction of the organization as evidenced by its: • Implicit or explicit goals and strategies • Capacity to perform in the context of changing environments and competitive actions Defines the fit between an organization’s capabilities and objectives and environmental threats and opportunities © 2013 Pearson Education, Inc. publishing as Prentice Hall Slide 9-8 THE MARKETING STRATEGY CONTROL PROCESS Operations Control Assesses how well the firm performs marketing activities as it seeks to achieve planned outcomes Assumes that: • The direction of the firm is correct • Only the organization’s ability to perform specific tasks needs to be improved © 2013 Pearson Education, Inc. publishing as Prentice Hall Slide 9-9 CHAPTER 9: MARKETING STRATEGY REFORMULATION—THE CONTROL PROCESS STRATEGIC CHANGE © 2013 Pearson Education, Inc. publishing as Prentice Hall Slide 9-10 STRATEGIC CHANGE Is the change in the environment that will affect the long-run well-being of the organization Represents opportunities or threats to an organization, depending on its competitive posture Example: The aging of the U.S. population © 2013 Pearson Education, Inc. publishing as Prentice Hall Slide 9-11 OPTIONS FOR DEALING WITH STRATEGIC CHANGE Allocate the resources necessary to alter the firm’s technical and marketing capabilities to fit its market-success requirements Shift emphasis to product markets where the match between success requirements and the firm’s distinctive competency is clear Cut back efforts in those product markets where the firm has been outflanked Leave the industry totally © 2013 Pearson Education, Inc. publishing as Prentice Hall Slide 9-12 CHAPTER 9: MARKETING STRATEGY REFORMULATION—THE CONTROL PROCESS OPERATIONS CONTROL © 2013 Pearson Education, Inc. publishing as Prentice Hall Slide 9-13 OPERATIONS CONTROL The goal of operations control is to improve the productivity of marketing efforts Ways to identify and allocate costs are: Marketing Channel Analysis Marketing-Cost Analysis Sales Analysis Customer Profitability Analysis Product-Service Mix Analysis © 2013 Pearson Education, Inc. publishing as Prentice Hall Slide 9-14 OPERATIONS CONTROL Marketing-Cost Analysis Its purpose is to: Trace, assign, or allocate costs to a specified marketing activity or segment Accurately display the financial contribution of activities or entities to the organization © 2013 Pearson Education, Inc. publishing as Prentice Hall Slide 9-15 OPERATIONS CONTROL Product-Service Mix Analysis This analysis involves two interrelated tasks: Assess the performance of offerings in relevant markets: Sales Volume Analysis Market Share Analysis Appraise the financial worth of offerings via: Contribution Margin Approach © 2013 Pearson Education, Inc. publishing as Prentice Hall Slide 9-16 OPERATIONS CONTROL Sales Analysis Its purpose is to direct attention to both the: Behavioral Aspect of Sales Cost Aspect of Sales Consists of sales effort and allocation of selling time Consists of expenses from the performance and administration of the sales function © 2013 Pearson Education, Inc. publishing as Prentice Hall Slide 9-17 OPERATIONS CONTROL Customer Profitability Analysis A profitable customer is a person, household, or company that, over time, yields a revenue stream that exceeds, by an acceptable amount, the organization’s cost of attracting, selling, and servicing that customer. © 2013 Pearson Education, Inc. publishing as Prentice Hall Slide 9-18 OPERATIONS CONTROL Customer Profitability Analysis Is calculated as follows: Customer Profitability = Customer Gross Margin ( – Customer Acquisition Costs © 2013 Pearson Education, Inc. publishing as Prentice Hall + Customer Retention Costs ) Slide 9-19 OPERATIONS CONTROL Customer Profitability Analysis When this is done for each customer, it is possible to classify customers into different profit tiers Drop them to eliminate their costs entirely Charge them higher prices/fees to increase profits Reduce the cost of serving them to make them more profitable © 2013 Pearson Education, Inc. publishing as Prentice Hall Slide 9-20 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. © 2013 Pearson Education, Inc. publishing as Prentice Hall Slide 9-21