Perreault−McCarthy: Basic
Marketing: A
Global−Managerial
Approach, 14/e- Managing Marketing’s
Link with Other Functional
Areas
Text © The McGraw−Hill
Companies, 2002596 Chapter 20
charged to Smith—all advertising costs were spent promoting Product C, which
Smith didn’t buy.Analyzing the results
We now see that Smith was the most profitable customer, yielding over 75
percent of the net profit.
This analysis shows that Brown was profitable too—but not as profitable as Smith
because Smith bought three times as much. Jones was unprofitable. Jones didn’t buy
very much and received one-third more sales calls.
The iceberg principle is operating again here. Although the company as a whole
is profitable, customer Jones is not. But before dropping Jones, the marketing man-
ager should study the figures and the marketing plan very carefully. Perhaps Jones
should be called on less frequently. Or maybe Jones will grow into a profitable
account. Now the firm is at least covering some fixed costs by selling to Jones. Drop-
ping this customer may only shift those fixed costs to the other two customers,
making them look less attractive. (See the discussion on contribution margin in
Chapter 19.)
The marketing manager may also want to analyze the advertising costs against
results—since a heavy advertising expense is charged against each unit of Product
C. Perhaps the whole marketing plan should be revised.Such a cost analysis is not a performance analysis, of course. If the marketing
manager budgeted costs to various jobs, it would be possible to extend this analysis
to a performance analysis. This would be logical and desirable, but many companies
have not yet moved in this direction.
Now that more accounting and marketing information is routinely available
on computers, and software to analyze it is easier to use, many managers are seiz-
ing the opportunity to do marketing cost and performance analysis—just like
factory cost accounting systems develop detailed cost estimates for products.
These changes also mean that more managers are able to compare marketing cost
and performance figures with expected figures to evaluate and control their mar-
keting plans.J.M. Huber is a company that
supplies Colgate with a key
ingredient for toothpaste. A
multidisciplinary team from
Colgate and Huber worked
together to understand all of the
costs in the supply process. Their
efforts reduced the total delivered
costs of Colgate’s finished
products by hundreds of
thousands of dollars.
Cost analysis is not
performance analysis