MarketingManagement.pdf

Sales-Promotion Efficiency

Sales promotion includes dozens of devices for stimulating buyer interest and prod-

uct trial. To improve sales-promotion efficiency, management should record the costs

and sales impact of each promotion. Management should watch the following statis-

tics:

■ Percentage of sales sold on deal

■ Display costs per sales dollar

■ Percentage of coupons redeemed

■ Number of inquiries resulting from a demonstration

A sales-promotion manager can analyze the results of different sales promotions

and advise product managers on the most cost-effective promotions to use.

Distribution Efficiency

Management needs to search for distribution economies in inventory control, ware-

house locations, and transportation modes. One problem is that distribution efficiency

declines when the company experiences strong sales increases. Peter Senge describes

a situation in which a strong sales surge causes the company to fall behind in meet-

ing delivery dates (Figure 6-14).^32 This leads customers to bad-mouth the company

and eventually sales fall. Management responds by increasing sales force incentives

to secure more orders. The sales force succeeds but once again the company slips in

meeting delivery dates. Management needs to identify the real bottleneck and invest

in more production and distribution capacity.

STRATEGIC CONTROL

From time to time, companies need to undertake a critical review of overall market-

ing goals and effectiveness. Each company should periodically reassess its strategic ap-

proach to the marketplace with marketing-effectiveness reviews and marketing audits.

Companies can also perform marketing excellence reviews and ethical–social respon-

sibility reviews.

The Marketing-Effectiveness Review

Here is an actual situation.

The president of a major industrial-equipment company reviewed the annual

business plans of various divisions and found several lacking in marketing

substance. He called in the corporate vice president of marketing and said:

I am not happy with the quality of marketing in our divisions. It is very uneven. I

want you to find out which of our divisions are strong, average, and weak in mar-

keting. I want to know if they understand and are practicing customer-oriented mar-

keting. I want a marketing score for each division. For each deficient division, I

want a plan for improving marketing effectiveness over the next several years. I want

evidence next year that each deficient division is improving its capabilities.

The corporate marketing vice president agreed. His first inclination was to

base the evaluation on each division’s performance in sales growth, market

share, and profitability. His thinking was that high-performing divisions had

good marketing leadership and poor-performing divisions had poor market-

ing leadership.

But good results could be due to a division’s being in the right place at the right

time. Another division might have poor results in spite of excellent marketing plan-

ning.

A company’s or division’s marketing effectiveness is reflected in the degree to which

it exhibits the five major attributes of a marketing orientation: customer philosophy, in-

tegrated marketing organization, adequate marketing information, strategic orientation,and

operational efficiency(see the Marketing Memo “Marketing Effectiveness Review In-

strument”). Most companies and divisions receive scores in the fair-to-good range.^33

part five

Managing and

Delivering Marketing

(^706) Programs
Sales
surge
Sales
fall
Delivery
delay
Management
increases sales
incentives
Perceived need
to improve
delivery time
Insufficient production
and distribution
capacity
No or late
action taken
to add capacity
FIGURE 6-14
Dynamic Interactions Between
Sales Orders and Distribution
Efficiency
Source:Adapted from Peter M. Senge,The Fifth Discipline.
© 1990 by Peter M. Senge. Used by permission of Dou-
bleday, a division of Bantam Doubleday Dell Publishing
Group, Inc.