MarketingManagement.pdf

■ Hewlett-Packard Each division of Hewlett-Packard evaluates its perfor-
mance on a customer-based scorecard that monitors 18 to 20 “business fun-
damentals.” Some, such as customer satisfaction and on-time delivery, are
rated for all divisions; other indicators are tracked according to the nature of
the division’s business. The company is thus able to gauge the effects of its
marketing strategies on sales and profits and to identify areas where im-
provements in performance can lead to improved quantitative results.
Focusing on customer-based criteria for evaluating the company’s success
was what led to the development of HP’s global account management (GAM)
program in the 1990s. As the largest international corporations redirected
their purchases of computer-related products and services from the most pow-
erful hardware to the most productive software, and then to the quest for
electronic solutions to problems affecting their global business, HP responded
by becoming a partner and adviser in problem solving. The GAM system de-
velops a relationship between HP’s top managers and the client corporation.
A senior sales executive is assigned as global account manager, providing on-
site service at the corporate headquarters of the global account. The customer’s
chief information officer provides a broad overview of the company’s needs,
and the global account manager helps to develop solutions.^28

PROFITABILITY CONTROL

Here are some disconcerting findings from a bank profitability study:

We have found that anywhere from 20 to 40 percent of an individual institu-

tion’s products are unprofitable, and up to 60 percent of their accounts generate losses.

Our research has shown that, in most firms, more than half of all customer re-

lationships are not profitable, and 30 to 40 percent are only marginally so. It is fre-

quently a mere 10 to 15 percent of a firm’s relationships that generate the bulk of

its profits.

Our profitability research into the branch system of a regional bank produced

some surprising results... 30 percent of the bank’s branches were unprofitable.^29

Clearly, companies need to measure the profitability of their products, territories, cus-
tomer groups, segments, trade channels, and order sizes. This information will help
management determine whether any products or marketing activities should be ex-
panded, reduced, or eliminated.

Marketing-Profitability Analysis
We will illustrate the steps in marketing-profitability analysis with the following ex-
ample:

The marketing vice president of a lawnmower company wants to determine

the profitability of selling its lawnmower through three types of retail chan-

nels: hardware stores, garden supply shops, and department stores. The com-

pany’s profit-and-loss statement is shown in Table 6.7.

chapter 22

Managing the

Total Marketing

Effort^701

A Simplified Profit-and-Loss

Statement

TABLE 6.7