Marketing Control Processes to put in place for 2018 !

Models, Systems and Tools to improve your Marketing

On behalf of Outsourced CMO ( OCMO), I wish all our readers and well wishers a very Happy and Prosperous New Year 2018.

I believe beginning of year is a good time to Evaluate the Marketing performance of your Enterprise, Startup, Small /Medium sized business in the past year and put Marketing Processes in place to make sure that 2018 is going to be much better than 2017. As the old saying goes ‘If anything can go wrong, it will.’’

It is a well known fact derived from research across companies over the years that most companies have inadequate control procedures. Key aspects of the lack of marketing control processes are:

·       Small companies do poorer job of setting clear objectives and establishing systems to evaluate performance

·       About 1/3 rd of companies have no regular review procedures for understanding problems from their products

·       Almost half of companies fail to compare and analyze their 4Ps including pricing, warehousing or distribution cost

·       Same number of companies fail to conduct a formal evaluation of advertising effectiveness or review  sales force performance

One of the key Marketing Controls that every company should put in place in the beginning of the year is the Annual Plan Control. The purpose of this control is to examine achievements of the planned results for sales, profits and other goals. Any CMO or Outsourced CMO should work with the Management team to help in this Marketing Control process, steps of which are as follows: 

The Marketing Tools one can use to check on plan performance are:

i)                    Sales Analysis

As the name indicates, this measures and evaluates the actual sales against the goals. This is broken into Sales Variance analysis and Micro-sales analysis. Sales Variance analysis is used to measure the relative contribution of different factors, such as Price, Volume (No. of Software licenses sold etc.), to the gap in sales performance. Micro-sales analysis looks at specific factors like Products, Territory and so forth in order to understand the cause for decrease in sales.

ii)                   Market Share Analysis

While doing sales analysis, one of the missing factors is the company’s comparison to its competitors. The different types of market share are Overall market share (Comparing with overall target market), Served market (Considering the specific target market) share, Relative market (Taking into account the top 3 competitors) share, and Relative market (Comparing to the leading competitor) share.

iii)                    Marketing Expense to Sales Analysis

This is an important ratio to calculate as part of the Marketing Control analysis. This includes five different ratios - Sales force to sales, Advertising to sales, Sales promotion to sales, Marketing research to sales and Sales administration to sales. The changes in these ratios need to be measured taking into account the fluctuations. The fluctuations can be tracked using a Control Chart Model which allows companies to measure the deviations between desired, upper and lower limits. When the Marketing expense to sales ratio is out of control, disaagregative data can be used to track the problem. An example of that is a graph which shows Quota Attainment (percentage) on x-axis and Expense Attainment (percent) on the y-axis in order to do a comparison and revenue deviation by region. This will show which region achieved its sales quota close to the expected expense levels and which region exceeded the quota with expenses being proportionately higher. This type of graph will also show the troubling regions which achieved less than 80% quota with disproportionately high expenses. These deviant regions can then be mapped with the associated sales representative to further analyze the reasons for the same.

iv)                   Financial Analysis

In order to see how and where the company is making money, the Marketing Expense to Sales ratio needs to be analyzed in an overall Financial Framework. A company can use the below Financial Model for calculating the Return on Net worth.

When the company performance deviates too much from the Marketing Plan and Goals, corrective action needs to be taken. Normally, the company needs to start with minor corrective actions and if they fail to work, more drastic measures need to be taken in order to reduce the deviation with the Marketing Plan and increase the overall performance.

The importance of the core Marketing Models, Tools and Systems cannot be overemphasized in today's Digital world. The other three Marketing controls every company should put in place in the start of the year are Profitability, Efficiency and Strategic Controls. I shall talk about these in my future blog posts.

Author: Anuj Khanna, Director, Outsourced CMO ; anuj@outsourcedcmo.in