Hey guys.  One interesting thing about marketing is that it is dynamic.  There are so many ways in which you can differentiate yourself from the competition so as to gain a competitive advantage.  In the previous article we demonstrated how you can use the Program Evaluation and Review Technique to increase marketing efficiency whilst minimising your costs.  That alone will gain you a competitive advantage in the marketplace especially when you consider the fact that the competition probably do not use that tool to drive their marketing strategies.  Today we will take a look at the Marketing Control System.  As we go I will also try to demonstrate how you can conduct some of the exercises that are a part of the marketing control system such as conducting a sales analysis.  I will also ask you, at the end of this article, to establish how effective marketing is in your organisation by responding to a questionnaire that I have put there.  So let’s get to it.

Marketing Strategy Factors

This diagram (Marketing Strategy Factors) shows you some of the things that you should consider when you are coming up with your marketing strategy.  In this article we are discussing the Marketing Control System.

Let’s start off by you answering the following questions for me either in the comments section, in your head or on a piece of paper.  The answers to these questions will give you an idea of where you stand in terms of a marketing control system.  If you are covered, then read on to ensure that you pick up any other ideas that are contained in this article.  If you are not covered, then, read on, really.

  1. Do you have systems to measure performance across these facets: Production; Research and Development; Purchasing; Marketing (this is what we are focusing on right now); Human Resource Management; Accounting and Finance.  Having performance measurement systems across these sections is important as you will ensure that you plug any leaks in your business.
  2. a)  Do you know the level of profitability for each of your products? b) Do you engage in exercises to spot and remove weak products/services from your portfolio?
  3. Do you have a way of comparing your prices to those of the competition and analyse your warehousing and distribution costs?  Do you have a way to analyse the causes of returned goods and to conduct formal evaluations of advertising effectiveness?  Do you have a way of reviewing your sales force reports?
  4. How long do you take to produce control reports?  How often are those reports inaccurate?

The answers to those questions will give you an indication of the amount of attention that you should have as you go through this article.  That said let us discuss the components of a marketing control system.

Apple iPhone 6

The Apple iPhone 6.  These iPhone’s are all the same in my opinion, from the old models to the new ones

Annual Plan Control

I have always said that all iPhone’s are the same, so why upgrade to the latest version?  The fact that the iPhone has been so successful when a new version comes out always baffles me.  I have always attributed this to the fact that the firm has some genius marketers.  A study that was conducted on MaseTV showed that from the iPhone 2G to the iPhone 5s there is not very much of an improvement in terms of the perceived performance of its processor.  All the iPhone’s that were tested had shutdown times, start-up times and website loading times that were within 5 seconds of each other.  This is quite a small variance considering the fact that they were comparing phones which are supposed to be generations apart.

Apple iPhone Sales

Apple iPhone sales over the last few quarters.  Apple missed its sales estimates in Q1 of 2016 (CNBC, 2016)

This lack of innovation is catching up with Apple though.  The company reported that it sold 74.8 million iPhone’s in the quarter, missing sales expectations of about 75.46 million, according to StreetAccount.  Apple’s most recent iPhone model, the 6s, is viewed by many analysts as boasting too incremental an improvement over prior iterations to warrant an upgrade – even for those who regularly trade in for the newest model.

Annual Plan Control is one of the four components of the marketing control system needed by companies to evaluate their marketing effort.  Its aim is to ensure that the company achieves the sales, profit and other goals established in the beginning of the year.  The prime responsibility of the annual plan is of top management and middle management. (Digital Marketing Dictionary, 2016).  The approaches that are used under the annual plan control are the Sales Analysis; Market Share Analysis; Sales-to-Expense Ratios; Financial Analysis; Market-Based Scorecard Analysis.

Looking at CNBC’s story on Apple a snapshot of the sales (Sales Analysis) shows us that Apple missed sales targets on units by 660 000 units for the iPhone, missed by 1 800 000 units for the iPad and missed by 500 000 units for the Mac.  However, Apple made $75.9 billion dollars compared to $74.6 billion dollars in the same period last year (Financial Analysis).  A major talking point in Apple’s annual plan control would be to ensure that the next iPhone is more revolutionary than evolutionary if these sales figures are anything to go by.

The main point of the Annual Plan Control is for the top and middle management to establish whether or not the plan is going according….to plan.  We can discuss the other components in the comments section but for now let me give a picture as to how you go about the Sales Analysis.

Sales Analysis

OK, so let us create a hypothetical situation that we can analyse.  We want to determine the effectiveness of each of the 3 advertising campaigns that I carried out over 2 week periods.  These advertising campaigns were for seminars that I was conducting as Plexis Strategy.  I used different approaches to the adverts so I wanted to see which approach was the best.

Plexis Seminar Cumulative Tables

Plexis Seminar Cumulative Chart

Plexis Seminar Registration/Sales Figures compared across three batches of attendees.   3 different approaches to advertising were used and I will now give a snapshot of how such information is analysed

To analyse the sales data I used an ogive chart in Excel (in the image above).  The ogive chart is a curve that shows the cumulative frequency for a given set of data.  The cumulative frequency is plotted on the y-axis against the data which is on the x-axis for ungrouped data (WyzAnt).  From the chart I can see that:

i) I surpassed my target of 600 registrations using all the three advertising methods that were a blog post, a Facebook post and a newspaper advert in the Herald.

Action Point:  Set a target of 2000 registrations in the next campaign

ii) The Facebook post was the most effective (Campaign 3) followed by the newspaper advert (Campaign 2) and then the blog post (Campaign 1) came in last.

Action Point: Establish reasons as to why this is the case and optimise the newspaper and blog channels in the next campaign.  The idea will be to establish whether the performance is a result of the channel that was being used or other factors

iii) The cost per registration of the blog post was $0.42 making it the cheapest source of leads and sales.  This was followed by the Facebook post which cost $0.53 per sale and lastly the newspaper advert which cost $0.98 per sale.

Action Point: Try to optimise Facebook posts and newspaper adverts through improving the copy and layout etc. to establish whether or not the cost per sale cannot be reduced owing to a better response rate to the adverts.

iv) The gradient of the curves of all the campaigns show that 14 days is a good window for registrations to the seminar as the slope of the gradient is almost flat when you get to 14 days into the advertising campaign.

Action Point:  Test by reducing the registration window to 10 days so as to see if I cannot get the same numbers in terms of registrations at a lower cost as I will have advertised for 5 days less.  The assumption is that people will have to register quicker assuming that the demand for the seminar is elastic and will respond positively to a reduction in the period of registration.

v)  Sharp increases in the rate of registration occur between day four and day 8 across all of the 3 campaigns.  This shows that interest wanes as we go deeper into the campaign.

Action Point:  Create a sub-campaign to support the main campaign and launch it on day 9 in order to maintain the registration rate as it slows down during this period.  An incentive can be placed whereby the fee can be reduced a little although the people who take up this option will have to give up the best seats to the early birds.

That’s a small example of Sales Analysis and the resulting action points that you have to come up with as part of your marketing control system.  As you can see from that snapshot sales analysis is more about the recommendations for improvement that come out of the analysis as opposed to establishing whether or not you have met your sales targets.  The more you improve, the more money you will make.

Profitability Control

I remember when I was registering my company, Plexis Strategy.  I was asked by my agent what I intended to do with Plexis Strategy.  I told him that I wanted to start a marketing consultancy and he said it was fine.  When he returned with the company papers I was astonished to see that he had registered my company for a whole bunch of other things that I was not interested in.  When I asked him why he had done that he said that I would thank him later.  I did thank him later, you will see why at the end of this section of the article.

Profitability control and efficiency control in the marketing control system allow the company to closely monitor the sales, profits and expenditures.  Profitability control demonstrates the relative profit-earning capacity of a company’s different products and consumer groups.  Companies are frequently surprised to find that a small percentage of their products and customers contribute to a large percentage of their profits (Britannica, 2016).  The last part of the definition is a major reason why this type of control is required in the marketing control system.  What if the products or services that give you the least amount of profit are the ones that take up the most in terms of man hours?  You would then consider reducing their output or even stopping production isn’t?  These are some of the decisions that you can make when you use the marketing control system.

This is how you calculate profitability:

i) Calculate the total revenues for your product.  For example if you sell 500 potatoes for $2 each total revenues would be = 500 potatoes x $2 which is $1000

ii) Calculate the total costs to manufacture the product.  This involves direct costs such as materials that are used to grow the potatoes.  You can also include the indirect costs that you can allocate to the production of the different units, such as the cost of the salesman who is also involved in the sales of the cucumbers, butternuts and bananas that your farm produces.

For the purposes of our story let’s say that your total costs of production are $700.  Subtract the costs to produce the product from the revenues of the product.  In the example, the product’s profitability is $1000 – $700 which is equal to $300.  If you want to know the profitability per product sold, then it is the product’s profitability divided by 500 potatoes which equals a profitability of $0.60 per unit.  So, based on this example you are making a profit isn’t?  Yes and no.

opportunity-cost

Although you might be making a profit.  What if with the same resources you could make more in terms of profit doing something else?  If you were to discover that what would that make you think of your current level of profitability?

We go back to that story.  I thanked the agent because the way that he registered my company has enabled me to engage in different types of business enabling me to take advantage of the best opportunities that were available at that time.  This is because even if you like doing something and you are doing it well it does not mean that there aren’t better opportunities that you can take advantage of with the same resources.  In order to assess the different opportunities that have arisen along the way I have made use of the principle of opportunity cost.

Opportunity cost is a benefit, profit, or value of something that must be given up to acquire or achieve something else.  Since every resource (land, money, time, etc) can be put to alternative uses, every action, choice or decision has an associated opportunity cost.  Opportunity costs are fundamental costs in economics and are used in computing the cost benefit analysis of a project.  Such costs, however, are not recorded in the account books but are recognised in modern decision making by computing the cash outlays and their resulting profit and loss (Business Dictionary).

So, taking this concept into account.  You find out that you can use the $700 that you could have used to grow and sell the potatoes to buy 500 shares from African Distillers Limited with these shares giving you a dividend of $2 per share (when compared with the $0.60 profit per unit for the potatoes).  You would consider using your resources to buy the shares right?  That is another dimension of profitability control which is considering other investment opportunities that you can exploit using finite resources.

Other approaches that are used under profitability control are profitability by Territory; Customer; Segment; Trade Channel; Order Size.

Efficiency vs Effectiveness

Efficiency versus Effectiveness.  When you are effective you use a lot of resources to produce a reasonable amount of output.  When you are efficient you use less resources to produce more output. Which team are you playing on?  Find out below

Efficiency Control

Let me tell you the story of two hunters.  These hunters went into the woods with the aim of killing some fowl.  One had an AK 47 machine gun and the other had a sniper rifle.  Both hunters believed that their weapon of choice would get the job done.  The hunter with the AK 47, Tonderai, believed that he was an effective hunter.  He believed that he would do the right thing and bring home some fowl.  Tafadzwa was in possession of a sniper rifle and he thought that he could do the same thing, but in a better way.  200 bullets later and after spraying the whole jungle being a nuisance in the process, Tonderai finally got the fowl.  He was proud as he actually did not care about what it had taken to catch the fowl.  He looked for Tafadzwa and was shocked to see that Tafadzwa had caught 4 fowls using 6 bullets.  Tafadzwa had produced much better results using less resources.  If these two hunters were businesses who would make more money?  Tonderai did the right thing, he was effective.  Tafadzwa did the right thing well, he was efficient.  Which team are you playing for?

One of the approaches that are used when you are conducting Efficiency Control exercises in a marketing control system is that of measuring the efficiency of the sales force.  It is not just about the numbers that one is bringing in but it is also about how these numbers are being brought in as the ‘how’ affects the achievement of organisational goals.  Whatever you do, include the following metrics when measuring the effectiveness of your sales force.  Measure:

i) Average number of calls per salesperson per day

ii) Average sales call time per contact

iii) Average revenue per sales call

iv) Average cost per sales call

v) Entertainment cost per sales call

vi) Percentage of orders per 100 sales calls

vii) Number of new customers per period

viii) Number of lost customers per period

ix) Sales force cost as a percentage of total sales

You can use these metrics and actually realise that your best salesman in terms of revenue created is actually not the most profitable salesman.  You can also use these metrics for the transfer of expertise among your subordinates as you ask those who are bringing in the most revenue at the least cost to coach their peers on how they do it.  In times like these it is important to ensure that you are operating at an optimum level when it comes to efficiency.  Being extremely efficient will plug revenue leakage which is important since every dollar counts.  So, looking at these metrics, according to the marketing control system, is your company Tonderai or Tafadzwa?

The other approaches that are used in the marketing control system to control efficiency in the execution of your marketing strategy are controlling the efficiency of your Advertising; Sales Promotion and Distribution.

Strategic Control

I am not going to dwell much on this section as I spoke of issues that are closely related to this aspect in Concepts That You Might Miss In Your Marketing Strategy For 2016 – Marketing Planning System.   The tools that I touched on in that article like the LogFrame Matrix will ensure that you will keep your strategic objectives in check.  However, I will define the term as it is applied in the marketing control system and then leave you with some homework to do.

Strategic Control is a term used to describe the process used by organisations to control the formation and execution of strategic plans; it is a specialised form of management control (in particular from operational control) in respects of its need to handle uncertainty and ambiguity at various points in the control process (Wikipedia).

One of the approaches that are used under Strategic Control in the marketing control system is the Marketing Effectiveness Review.  The purpose of this review is for you to establish the effectiveness of your marketing by determining the degree to which you exhibit the 5 major attributes of a marketing orientation.  Evaluate yourself honestly using the instrument below and we can then discuss your score and its implications in comments section.

Marketing Review Instrument

Review

The Marketing Effectiveness Review (Harvard Business Review).  Rate yourself using this form and then we can discuss what your form means in the comments section.  I will not go on to talk about what this means or that means in the article.   Let us view things from your side.

The other approaches that are used under strategic control are the Marketing Audit; Marketing Excellence Review; Company Ethical and Social Responsibility Review

There it is folks!  That is how you keep your marketing strategy in check using a marketing control system.  Based on this article do you think that you are doing enough to ensure that you will attain your marketing objectives in 2016?  If so, why?  If not, why?  Let us discuss in the comments section.

Thanks

Ruvimbo