chapter 17 - industrial marketing

8/10/2019 Chapter 17 - industrial marketing

http://slidepdf.com/reader/full/chapter-17-industrial-marketing 1/74

PowerPoint by:

Ray A. DeCormier, Ph.D.

Central Ct. State U.

Chapter 17:

Marketing

PerformanceMeasurement



Astute marketers evaluate the profitability of alternative

segments and assess their marketing mix to isolate problems

and opportunities and, if necessary, alter strategy. From this

chapter you will understand:

1.

A system for converting a strategy vision into a concrete set of

performance measures.

2. The function and significance of marketing control in business

marketing management.

3. The components of the control process.

4.

The distinctive value of “dashboards” for evaluating marketing

strategy performance.

5. The importance of execution to the success of business

marketing strategy.



When Marketing Strategies Go Wrong?

• When companies fail to deliver on theirpromises, who or what made the mistake?• Was it the CEO?

• Marketing VP?• Sales VP?

• Who caused it? What happened?

• Often, it is because the strategy was notexecuted well.



Have you ever wanted to coach a sports

team?

How about a baseball, basketball, hockey,soccer, field hockey, or football team?

Managing a B2B Marketing team is likebeing a B2B coach!



The CEO is like being the head manager a football team.

The marketing manager is the team coach.

The sales manager is the offensive coach.

The salesperson is the quarterback.

The rest of the players are part of the team.

Implementing a marketing program is like executing a play book.

Implementing a strategy is like implementing a series of downs.

Implementing a tactic is like implementing a play.



Sports Analogy (con’t)

6

The challenge is to select the correct strategy suchas “Should we focus on running or passing”?

What are the other teams’ strengths and

weaknesses and what are our strengths and

weaknesses? What plays should we employ to exploit the

opposition’s weaknesses and check their strengths?

Business marketers do this same type of thinkingwhen responding to customer needs and dealingwith competitive influences.



Half the job is developing & implementing thestrategies.

The other half is assessing whether or not thestrategy(s) worked!

In order to find out, it is imperative that a reportingand marketing control system be part of the plan.



According to James Harrington, Qualityadvisor of Ernst & Young:

“Measurement is the first step that leads tocontrol, and eventually to improvement.

If you can’t measure something, you can’tunderstand it!

If you can’t understand it, you can’t controlit!

If you can’t control it, you can’t improve it.”



Marketing Control Systems should provide information for:

1. Assessing and/or revising current strategy

2. Formulation of a new strategy

3. Allocating funds

A control system needs to:

1. Continuously collect data about appropriate

performance measures

2. Monitor the quality of strategy implementation



Checks actual against planned performance by

evaluating profitability of products, customer

segments, and territories.

1. Develop the strategy

2. Implement it

3. Control it

4. Understand the whole process

It’s a necessary but very difficult task



Again, this is a difficult task!

Let’s see how it’s done!



One way to understand the nature of a strategy

is to understand the Balanced Scorecard

because it focuses on 4 important areas:

1.

Financial Perspective

2.

Customer Perspective

3. Internal Perspective

4.

Learning and Growth Perspective



Learning and

Growth

Perspective

Manage Organizational Change

Enhance Our

People Integrate Key

Technologies Align

Organization

Develop new capabilities

Identify new roles and responsibilities

Create CRM platform

Build management and customer reporting

Communicate customer vision

Align incentives to vision

Internal

Perspective Improve Customer Experience Leverage Customer Service Rationalize Operations

Mass

Customization

Relationship

Marketing

Personalized,

Proactive

Service

First Time

Right

Migrate to

Appropriate

Channels

Streamline

Processes,

Business,

and Brands

Innovation Customer Management Operational Excellence

Customer

Perspective

Create Distinctive Customer Value by Enhancing the Customer Relationship

From

Commodity

to Solution

Trusted

Partner

Personalized

Customer

Service

Seamless

Access

Image Relationship Service Functionality

Financial

Perspective

Growth Strategy Productivity

Strategy Increase

Shareholder

Value Create Profitable

Customer

Revenues

Lower

Operating

Costs



This section describes financial growth & productivity outcomes

for a certain purpose: This pinpoints the chain of logic by which intangible assets will

be transformed into tangible value.

I. Purpose Increase Shareholder Value

II. Financial growth outcomes, to name a few, include:

a. % Profit from sales

b. Sales growth

III.Productivity outcomes, to name a few, include:

a. Lower operating costs

b. Inventory turns



Learning and

Growth

Perspective


Enhance Our


Technologies Align

Organization



Create CRM platform




Internal


Mass

Customization

Relationship

Marketing

Personalized,

Proactive

Service

First Time

Right

Migrate to

Appropriate

Channels

Streamline

Processes,

Business,

and Brands


Customer

Perspective


From

Commodity

to Solution

Trusted

Partner

Personalized

Customer

Service

Seamless

Access


Financial

Perspective


Strategy Increase

Shareholder


Customer

Revenues

Lower

Operating

Costs



Defines the strategies on how the firm proposes to

deliver a competitively superior value proposition to

the targeted customer.

Clarifies the conditions that create value for the

customer.

It could include:

a. Moving product image from commodity to branded

product

b. Personalized customer service

c. Utilize Partners (Distributors or manufacturing reps)



Learning and

Growth

Perspective


Enhance Our


Technologies Align

Organization



Create CRM platform




Internal


Mass

Customization

Relationship

Marketing

Personalized,

Proactive

Service

First Time

Right

Migrate to

Appropriate

Channels

Streamline

Processes,

Business,

and Brands


Customer

Perspective


From

Commodity

to Solution

Trusted

Partner

Personalized

Customer

Service

Seamless

Access


Financial

Perspective


Strategy Increase

Shareholder


Customer

Revenues

Lower

Operating

Costs



3. Internal Perspective

This describes the business processes that directlyaffect the chosen strategies.

This level transforms intangibles assets into customerand financial outcomes such as:

Customer Relationship Management

Innovation Management

Operations Management

Supply Chain ManagementRegulatory & Social Processes Management



Learning and

Growth

Perspective


Enhance Our


Technologies Align

Organization



Create CRM platform




Internal


Mass

Customization

Relationship

Marketing

Personalized,

Proactive

Service

First Time

Right

Migrate to

Appropriate

Channels

Streamline

Processes,

Business,

and Brands


Customer

Perspective


From

Commodity

to Solution

Trusted

Partner

Personalized

Customer

Service

Seamless

Access


Financial

Perspective


Strategy Increase

Shareholder


Customer

Revenues

Lower

Operating

Costs



4. LEARNING & GROWTH PERSPECTIVE

This describes the human, informationand organizational capital to supportvalue creating internal processes.

This defines the intangible assets thatmust be aligned and integrated to create

value.



Learning and

Growth

Perspective


Enhance Our


Technologies Align

Organization



Create CRM platform




Internal


Mass

Customization

Relationship

Marketing

Personalized,

Proactive

Service

First Time

Right

Migrate to

Appropriate

Channels

Streamline

Processes,

Business,

and Brands


Customer

Perspective


From

Commodity

to Solution

Trusted

Partner

Personalized

Customer

Service

Seamless

Access


Financial

Perspective


Strategy Increase

Shareholder


Customer

Revenues

Lower

Operating

Costs



DEVELOPING THE STRATEGY STEP 1: FINANCIAL AND GROWTH GOALS

The ultimate goal is to build shareholder value.

We might start with setting two major goals:

Financial & Productivity

a. Long term financial goals

b. Long Term productivity goals

Next, we establish short-term goals for each areato form a value gap, which is the differencebetween a future desired state and the presentreality state.



Step 1: Financial & Productivity Growth Goals

The difference between long and short term goals mustbe realistically analyzed because if it’s too much, it’ll

discourage the organization from achieving it.

The goals must be functionally related and logical. Forexample, if you increase sales productivity, does itdirectly relate to more units sold and an increase insales?

To achieve the large goals, set a number of smaller goalson a time line that work towards achieving the largerones.



Step 1: Financial & Productivity Growth Goals

Financial Goals:

1. Large goal: Increase net worth 30% over 3

yrs.2. Smaller goal: Increase net worth by 10%/yr.

a. Large: Increase sales by $2.1M within 3 yrs.b. Smaller: Increase sales by $700K/yr.



Learning and

Growth

Perspective


Enhance Our


Technologies Align

Organization



Create CRM platform




Internal


Mass

Customization

Relationship

Marketing

Personalized,

Proactive

Service

First Time

Right

Migrate to

Appropriate

Channels

Streamline

Processes,

Business,

and Brands


Customer

Perspective


From

Commodity

to Solution

Trusted

Partner

Personalized

Customer

Service

Seamless

Access


Financial

Perspective


Strategy Increase

Shareholder


Customer

Revenues

Lower

Operating

Costs



If you want to achieve increased sales

(Step 1: $700K/yr) you’ll need to:

Get new customers or Increase the business from customers

you already have.

To do that, you need to clearly and

explicitly develop or promote your core

Customer Value Proposition (CVP).



Four key customer value propositions( recall from Ch. 7):

1. Low Total Costs

2. Product Leadership Innovation

3. Complete Customer Solutions

4. Lock In (once a prospect is a customer, thestrategy is to keep him a customer)



Say we adopt “Low Total Costs ”

What does that mean to the customer?

It means our strategy will offer:

a. Attractive prices

b. Excellent & consistent quality at same or lower prices

c.

Ease of purchase

d.

Responsive service and more around reducing costs

for the customer



To coordinate the plan, start with long-term financialgoals and break them into short term time frames.The marketing plan might present them in weekly,monthly and annual terms.

Break down the short term financial goals in terms ofactivity. What does increased sales mean in terms ofactivity? Does it mean:

a. Add more sales people?

b. Develop more customers with present salespeople?

c. Do more business with present customers?

Step 3: Establish Time Line for Results



Learning and

Growth

Perspective


Enhance Our


Technologies Align

Organization



Create CRM platform




Internal


Mass

Customization

Relationship

Marketing

Personalized,

Proactive

Service

First Time

Right

Migrate to

Appropriate

Channels

Streamline

Processes,

Business,

and Brands


Customer

Perspective


From

Commodity

to Solution

Trusted

Partner

Personalized

Customer

Service

Seamless

Access


Financial

Perspective


Strategy Increase

Shareholder


Customer

Revenues

Lower

Operating

Costs



STEP 4: IDENTIFY CRITICAL STRATEGIC THEMES

Each customer value proposition is interpreted into

the company’s internal process objectives:

Internal process objectives support two criticalelements of a company’s strategy:

1. To create and deliver the customer valueproposition to the customer.

2. To improve various internal operating processesto reduce costs and enrich the productivity

component from a financial perspective.



Step 4: Identify Critical Strategic Themes

Internal Business Processes include:

1.Innovation Management

2.Customer Management

3.Operations Management

Balanced Scorecard: Boise Office Solutions Strategy Map



Balanced Scorecard: Boise Office Solutions Strategy Map

Learning and

Growth

Perspective


Enhance Our


Technologies Align

Organization



Create CRM platform




Internal


Mass

Customization

Relationship

Marketing

Personalized,

Proactive

Service

First Time

Right

Migrate to

Appropriate

Channels

Streamline

Processes,

Business,

and Brands


Customer

Perspective


From

Commodity

to Solution

Trusted

Partner

Personalized

Customer

Service

Seamless

Access


Financial

Perspective


Strategy Increase

Shareholder


Customer

Revenues

Lower

Operating

Costs



Recall From Step 2 above:Customer Value Proposition

Four Key Customer Value Propositions(Ch. 7)

1.Low Total Costs2.Product Leadership Innovation3.Complete Customer Solutions4.Lock In (once a prospect is a

customer, thestrategy is to keep him a customer)



CVP Strategy The Focus of Internal Business Processes

Operations Management Custom er Relationship Management Innovation Management

Low Total Cost Strategy Highly Efficient Operating Ease of Customer Access Seek Process Innovations

Processes Superb Post-Sales Service Gain Scale Economies

Efficient, Timely Distribution

Product Leadership Flexible Manufacturing Capture Customer Ideas for Disciplined, High-Performance

Strategy Processes New Offering Product Development

Rapid Introduction of Educate Customers about Complex First-to-Market

New Products New Products/Services

Complete Customer Deliver Broad Product/ Create Customized Solutions Identify New Opportunities

Solutions Strategy Service Line for Customers to Serve Customers

Create Network of Suppliers Build Strong Customer Anticipate Future Customer

for Extended Product/ Relationships Needs

Service Capabilities Develop Customer Knowledge

Lock-in Provide Capacity for Create Awareness Develop and Enhance

Strategies Proprietary Product/ Influence Switching Costs of Proprietary Product

Service Existing and Potential Increase Breadth/

Reliable Access and Customers Applications of Standard

Ease of Use

Source: Adapted from Robert S. Kaplan and David P. Norton, Strategy Maps: Converting Intangible Assets into Tangible Outcomes (Boston: Harvard

Business School Publishing Corporation, 2004), pp. 322-344.



Step 5: Identify Human, Informational and

Organizational Resources to Support Strategy

• Step 5 is concerned with the learning &growth level of the Balanced Scorecard.

• The three principal drivers are:

1.Human Capital

2.Information Capital

3.Organizational Capital



Learning and

Growth

Perspective


Human Capital

Enhance Our

People

Information Capital

Integrate Key

Technologies

Organizational Capital

Align Organization



Create CRM platform




Internal


Mass

Customization

Relationship

Marketing

Personalized,

Proactive

Service

First Time

Right

Migrate to

Appropriate

Channels

Streamline

Processes,

Business,

and Brands


Customer

Perspective


From

Commodity

to Solution

Trusted

Partner

Personalized

Customer

Service

Seamless

Access


Financial

Perspective


Strategy Increase

Shareholder


Customer

Revenues

Lower

Operating

Costs



Step 5: Identify Human, Informational and

Organizational Resources to Support Strategy

Step 5 addresses the issue:

How ready is the organization to support the

internal processes that drive the strategies?

This step makes sure that everyone is aligned withthe strategy by assuring they are trained and havethe necessary information technology andincentives in place to implement it.



Step 6: Develop an Action Plan

Develop an action plan that provides funding foreach strategic initiative.

By doing so, this supports the overall strategy ina coordinated fashion.

The outcome will result in an integrated bundleof investments. This idea is similar to a conceptcalled “Zero Based Budgeting”



Translating the 6 Steps

Using this strategy MAP coupled withmeasurements of both activity and financialmeasures throughout each level…

1. Clearly describes the strategy2. Details objectives at critical internal

processes that creates value

3. Provides resources to implement thestrategy in an integrated way

…to achieve financial and productivity goals.



The purpose of a marketingstrategy is to yield results frominvested resources. Resultsmight include:

1. Profit contribution

2. % Market share

3. Increase new customers

4. Cost to serve customers

5. Salesincrease/customer

6. Various other goals

Interrelated Evaluations

In order to do this, thereare four interrelatedevaluations which arerequired to design amarketing strategy!

They are…

Marketing Strategy: Allocating Resources



How should we allocatemarketing dollars?

(E.g., Advertising,

personal selling, both?)

Within each marketingstrategy element, how should

we best allocate dollars tobest achieve our marketingobjectives? (E.g., Advertisingmedia choices?)

Which market

segments, products,and geographic areaswill be most profitable?

1 2

43

How much should wespend on marketing inthe planned period?



After allocating resources, it is important to

compare actual to planned and analyze the

differences.

Performance is measured in $$$ & in activity.

Address deviations above/below planned.

What caused the difference?

Level of Marketing Controls



Control process is universal--can be applied to any level of marketing analysis.

Further, management must evaluate resource allocation within each particular element.

Level of Marketing Controls

Table 17.1



Strategic control is based on a comprehensive evaluation of whether ornot the firm is headed in the right direction.

Are we achieving our planned goals?

One way to assess success is to do a marketing audit. It should be: Comprehensive

Periodic

Systematic evaluation of marketing operations

It considers both the marketing environment & internal marketingactivities

Environment includes company image, customer characteristics,competitive activities, regulatory constraints & economic trends

Internal Marketing activities includes marketing objectives,

organization and implementation



Is a business strategy that provides performancefeedback regarding the results of marketingefforts.

Companies with strong MPM programsoutperformed competitors.

They had a positive influence on return on assets

(ROA).

CEOs were pleased with the results.



A list of key metrics that providesmanagement with information to track

progress on marketing performance tobusiness outcomes. Example: Track no. of letters sent out and

measure the number of qualified leads it

generated. How many of these leads actually resulted in

new sales? Repeat sales?



The metrics will vary depending upon the organization.

Company must try to understand what are:

“True Business Drivers”, and

Ones that can be manipulated

Drives might be:

Share of wallet to measure performance relative tocompetition

Customer average expenditure to measure lifetime value

Customer loyalty to measure how customer feels aboutrelationship



Marketers need to:

Define “key” performance drivers

Know where to find the data

Information will come from:

Accounting

CRM programs

Specific collection of information

Information needs to be relevant and related to whatthe marketing strategy is trying to accomplish.



1. Foster decision making – the metric shouldsuggest a course of action to be followed.

2.Provide a unified view of marketing’s valueto the business.

3. Enable better alignment between marketingand business.

4. Translate complex measures in to ameaningful and coherent set of information.



Table 17.2 Examples of Macrosegmentation:

Aircraft Industry



Dashboard Metrics: Operation and Execution

Operation metrics include:

Marketing budget ratio: Marketing costs/Sales Program: Program (personal selling-ad costs)/Sales

Awareness to Demand ratio:

% of Marketing costs to awareness building vs. demand

generation

Execution metrics determine how effectively themarketing strategy is being executed

Are we building awareness? Are we creating and attaining new business?

Are we keeping our old customers satisfied?

Are we closing deals?



Sales by market segments

Sales relative to potential

Sales growth rates

Market share

Contribution margin

Percentage of total profits

Return on investment

Table 17.3



Advertising effectiveness by media type

Actual audience/target audience ratio

Cost per contact

Number of calls, inquiries, and information requests by media type

Dollar sales per sales call

Sales per territory relative to potential sales

Selling expenses to sales ratios

New accounts per time period

Table 17.3



Price changes relative to sales volume

Discount structure related to sales volume

Bid strategy related to new contracts

Margin structure related to marketing expenses

General price policy related to sales volume

Margins related to channel member performance

Table 17.3



Activity & Profitability Control

Activity-Based Costing (ABC method)

It’s an accounting system that links costs withvarious activities.

This method allocates costs to particularactivities, customers, market segments.

Example:a. How much sales ($$$ & units)/customer.b. How much does it cost to service a customer?c. What is the right mix?



PROFITABILITY CONTROL:BENEFITS OF ABC

The ABC method allows the businessmanager to focus on increasingprofitability by:

a. Understanding the sources of costvariability

b. Developing strategies to:

1. Reduce resource commitment

2. Enhance resource productivity



Q: If it is too expensive to service a

customer, how can we reduce that cost,

make the salesperson more effective, and

still have a profitable customer?

A: One way is to set up internal systems to

recognize the problem and train the

salesperson to handle this situation sohe/she can get the customer to increase his

weekly order to a profitable order size.

Implementing the Marketing



Implementing the MarketingStrategy

Marketing plans fail, not because they were not good, butbecause management implemented them poorly.

Implementation is the link between strategy formulation

and performance!

Implementation is the process that translate plans intoaction!

Good marketing implementation is the process thatassures that functional assignments are in line with theoverall marketing strategy.



Politics The Ultimate Problem

Often times, politics creates challenges for

even the best plans.

Because of diverse functional areas that

participate in the planning andimplementation process, certain challengesemerge.

Thomas Bonoma asserts that there are fourimplementation skills that effectivemarketing managers should employ to

lessen these concerns.



1 2

43

Interacting Allocating

Monitoring Organizing



#1 Interacting #2 Allocating

Marketing managersinteract with internal and

external peers.

Best people have:

Good bargaining skills

Referent power skills

Allocating skills includecontrolling time,

resources and people toget the marketing jobdone.



Monitoring & Organizing

#3 Monitoring

• Marketing managers who

demonstrate flexibility,

understand the firmsinformation & control

systems (manage by

numbers) can manage

with/without formalcontrol systems

inadequacies.

#4 Organizing

• Best managers know

how to organize and

motivate both: – Formal and

– Informal groups



The following chart views interrelationshipsbetween various functional groups within anorganization.

Marketing Specialists understand marketing.

Other functional specialists understand the “nutsand bolts” of their areas.

The objective is to bring them together to form a“synergistic pooling” of knowledge.

Marketing Strategy Implementation Guide

Table 17.4



DecisionArea

Marketing Sales Manufact-

uring

R&D Purchasing Physical

Distribution

Technical

Service

S B U’s Corp. Level

Planner

Product/

Service

Quality

Technical

Support

Physical

Distribution

National

Account

Management

Channel

Relations

Sales Support

Product /

Service

Innovation

Abbreviations to indicate decision roles: R = Responsible; A = Approval;

C = Consult; M = Implement; I = Inform; X = No role in decision

Marketer’s Role is to:



Marketer s Role is to:

1. Insure maximum customer satisfaction.2. Develop strategies to facilitate a desired

market response (facilitate exchange).

To do this, marketers:A. Assume an active role in creating strategy

B. Coordinate strategies with other functionalmembers

C. Are the ones who integrate the collectivestrength of the enterprise to satisfycustomer needs profitably!



Recap

Once the marketing strategy is formulated,manager needs to evaluate responses fromtarget markets.

The marketer will look for discrepancies betweenplanned and actual performance.

The marketing control system facilitates this taskand enables the marketer to reassess businessopportunities and make adjustments as neededin either strategy and/or execution.

The Big Picture



The Big Picture

The next frame (fig. 17.2) synthesizes the material discussed

in this book.

I. Part 1 introduced major customer classifications.

II. Part 2 focused on organizational buying behavior &customer relationship management.

III. Part 3 discussed assessing marketing opportunities toinclude identifying, measuring and forecasting sales bymarket segments.

IV. Part 4 paid attention to challenges and opportunities that

rapidly developing economies (RDEs) present to B2Bfirms.

V. Part 5 explored various dimensions of the marketingcontrol process.



Fig. 17.2

Chapter 17:



Chapter 17:Marketing Performance Measurement

Business Marketing Management – B2B 10e

Michael D. HuttArizona State University

Thomas W. SpehMiami University

PowerPoint presentation byRay A. DeCormier, Ph.D.Central Connecticut State University

chapter 17 - industrial marketing

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