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 Marketing strategy audit 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 budget to the  Variances are then analysed corrective action for appropriate 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 sales and sales results are difficult to forecast exactly may not produce 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 zero based 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

       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 units cost analysis is used to determine the relative profitability of its territories, product lines or other marketing 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 costs and profitability of a product range or segment analysis is a study of the 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 organisation . Direct expenses (separable expenses) are those incurred totally in connection with one market segment or one unit of the sales 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 segments supporters contend that it is not possible to accurately allocate indirect costs among product or market 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 records the gross sales-the total amount sold by the company statement 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

        Financial ratio Gross margin analysis percentage Net profit percentage Expense to sales ratio Stock turn Markdown rate 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