Essentials of Health Care Marketing 2nd Ed. Eric Berkowitz Chapter 14 Controlling and Monitoring

Chapter 14 Learning Objectives 1.Explain the value of monitoring market share compared to using absolute measure of performance 2.Recognize the value of sales, profitability, contribution, and variance analysis 3.Understand the array of specific marketing mix control procedures to monitor mix-specific activities 4.Describe the scope of an organization’s marketing audit and elements of that audit

Learning Objective 1 Five steps to monitor marketing activity –Establish performance standards –Specify data requirements –establish data collection system –Analyze and monitor marketing activities –Adjust strategy and tactics

Learning Objective 1 Absolute indicators of performance limits knowledge of the dynamics of the marketplace. –Example – gross revenue, expense control, net revenue, etc.

Learning Objective 1 Three types of Market Share Measures –Overall Market Share Sales as a percent of total industry sales –Served Market Share Sales as a percent of total sales of the served market –Relative Market Share Calculated percent of organization’s sales compared to largest competitor or combination of 3 largest competitors

Learning Objective 2 Sales Analysis –Compares the actual sale generated with the established goals. Criteria: product line analysis, customer size, geographic region, or discount level

Learning Objective 2 Profitability Analysis –Examines the profitability of sales by customers, regions, products, or salespeople –Direct costing – costs assigned that are directly associated with product or service line. –Full costing – assigns both direct and indirect costs with the product or service.

Learning Objective 2 Contribution Analysis –Considers the contribution of profit to fixed costs or overhead –PVCM – percentage variable contribution margin Average unit price-unit variable cost unit price

Learning Objective 2 Variance Analysis –Compares actual results to pre-established performance targets Volume variance – difference between expected and real unit sales Contribution (price) Variance – Difference between expected and real contribution margin Product Mix Variance – Difference between actual and targeted performance levels due to composition of products or services offered Price Variance – Difference between actual price received and the targeted level because of discounting.

Learning Objective 3 Sales Force Control –Tied directly to the performance expected –Sales/Expense Ratio – Indicates the efficiency of the salesperson in generating output

Learning Objective 3 Advertising Control –Essential to specify advertising objectives prior to promotional campaign

Learning Objective 3 Customer Satisfaction Control –Surveys –Essential for marketing strategy success

Learning Objective 4 Marketing Audit –A systematic review and appraisal of the total marketing operation

Learning Objective 4 Five purposes for the Marketing Audit –Appraises total marketing operation –Centers on the evaluation of objectives and policies and assumptions that underlie them –Aims for prognosis as well as diagnosis –Searches for opportunities and means for exploiting them, as well as for weaknesses and means for elimination –Practices preventive as well as curative marketing practices

Summary Market share provides a relative rather than absolute measure of performance. Market share can be either overall market share, served market share, or relative market share. Sales analysis monitors sales performance relative to targets. It can be conducted on multiple bases for comparison. Profitability analysis examines profitability by customers, regions, or products. The underlying premise is to monitor for a heavy half phenomenon.

Summary continued A key issue in profitability analysis is the assignment of cost. It can be either a direct-cost or full-cost approach. Contribution analysis considers performance of a service based on its contribution to profit or overhead. Variance analysis compares actual results to targets. In conducting variance analysis it is possible to identify the source of the variance. Variance can be due to volume, contribution, product mix, or price.

Summary continued Return-on-Investment is a useful way to choose between projects. Many organizations set a threshold ROI. Multiple measures of input and output are used in the monitoring of salespeople. A common efficiency indicator is the sales/expense ratio. To monitor ongoing advertising efforts, an organization can establish media effectiveness, creative effectiveness, and service effectiveness ratios

Summary continued Customer satisfaction control is at the foundation of any effective marketing program. Dissatisfied customers have been found to represent a real dollar cost to the organization. Periodically, every health care entity should conduct a marketing audit, which is a systematic review of all policies, procedures, and structures used to implement marketing activities.