Conceptualizing The Marketing Process as a Machine Converting Marketing Effort into Marketing Goals and Outcomes Ted Mitchell

Almost everything Can be conceptualized as a machine Machines can characterized as having three constituent parts 1)Inputs, 2) Outputs, and 3) Conversion rates

A Basic Machine The Machine’s Conversion Process Input I am the manager of this machine Input Input Input The Machine’s Conversion Process Outputs Outputs Outputs Outputs Many Outputs from The Marketing Machine

Humans are machines Needing the inputs of food, water, and air, Converting them Into the outputs to move about and find more inputs the conversion process is called metabolism measured in calories per day

Tree Leaves are machines Inputs: carbon dioxide, light and water Output: Oxygen Conversion called Photosynthesis measured as the percent of light energy converted into chemical energy

Cars are Transportation Machines Inputs: gasoline, driving time Outputs: miles of distance covered Conversion rates include: miles per gallon and miles per hour I need Inputs

Marketing is an Abstract Machine It needs inputs and has outputs Inputs: The Four P’s of the marketing mix Outputs: Profits, Revenues, Demand, Customer Satisfaction Conversion rates: measured as profits returned per dollar of marketing expense, revenues generated per sales call, units sold per advertising insert, etc.

Marketing Machine: 4 P’s as Inputs Many Inputs to The Marketing Machine Place Now I am the manager of this machine Promotion Price Tags Product Quality The Marketing Machine Quantity of Goods Sold Revenues, R Customer Satisfaction, S Customer Awareness, W Gross Profits, G Marketing Profits, Z Many Outputs from The Marketing Machine

Basic Premise Marketing Managers know how to drive a marketing machine Marketing Students must learn to drive a marketing machine Driving a marketing machine can be compared to driving a car

Consider the Situation of Driving a car for a distance and evaluating your car’s performance compared to the performances of other cars is similar to driving a marketing machine to produce profitable sales and comparing your marketing machine’s performance to the performances of other marketing machines

Both Cars and Marketing Machines Are very complex machines To learn Driving We start with highly simplified Models Of Cars as Transportation Machines with the desired outcome of a distance travelled Of Marketing Machines as a business machines with the desired outcome of generating profitable sales

A Car is a Transportation Machine There are many potential goals and objectives that could be assigned to a car as a transportation machine Its primary and overarching goal is to maximize the distance it travels The primary output of a transportation machine is measured by the number of miles it travels

Marketing as a Business Machine There are many potential goals and objectives that could be assigned to marketing as a business machine (demand, revenue, profit) Its primary and overarching goal of the marketing machine is to maximize profitable sales A basic metric for measuring the output of the marketing machine is the number of things, goods and services it sells The most popular metric for measuring marketing output is the number of dollars, $, it generates

The Performance of a Car As a transportation machine is measured in terms of three dimensions 1) number of miles travelled (Output) 2) amount of resources the car uses to travel the miles (Inputs) 3) the efficiency of the car at converting the inputted resources into miles driven (Conversion rate) measured as miles per input mpg and mph

The Performance of a Marketing Machine A Marketing machine is measured in terms of three elements 1) number of dollars generated (Output) 2) amount of business resources the machine uses to produce marketing profits (Input) 3) the efficiency of the marketing machine at converting the business resources into dollars of profit (conversion rate) measure as dollars of profit per dollars of expense Sales Returned on Advertising, Profit Returned on Marketing

There are many possible Metrics for measuring inputs A transportation machine such as a car has inputs Amount of fuel, Number of hours it is driven and converts them into miles of distance travelled A marketing machine such as a coffee shop has inputs Number of servers working, Number of hours the shop is open and converts them into dollars of profits generated

Process miles per gallon A Basic Car gasoline gasoline Strange looking Car gasoline gasoline The Car’s Conversion Process miles per gallon Miles Travelled Miles Travelled Miles Travelled

Simple Models of A Car’s Performance as a Transportation Machine Input to the Car, I Gasoline: Gallons, G Conversion rate, r = O/I Miles per gallon, r = mpg or M/G Output from the Car, O = r x I Distance travelled: Miles, M A better car and driver will get more miles for the same resources than a poorer car and driver.

Simple Models of A Car’s Performance as a Transportation Machine Inputs to the Car, I Gasoline: Gallons, G Driving Time: Hours, H Conversion rate, r = O/I Miles per gallon, r = mpg = M/G Miles per Hour, r = mph = M/H Output from the Car, O = r x I Distance travelled: Miles, M Distance travelled, Miles, M A better car and driver will get more miles for the same resources than a poorer car and driver.

A Basic Marketing Machine Number of servers hired Number of servers hired It looks like A Two-Factor marketing machine Number of servers hired Number of servers hired Marketing Machine Cups sold per server Profit from Cups of Coffee sold Profit from Cups of Coffee sold Profit from Cups of Coffee sold

Simple Models of Marketing Machine Performance Inputs to the Marketing Machine, I Number of Servers Hired: S Conversion rate, r = O/I Profits Returned per Server, Return on Servers r = Z/S Output from the Machine, O = r x I Dollars of Marketing Profits, Z A better marketing manager and machine will generate more dollars of profits than an average marketing machine and manager

Simple Models of Marketing Machine Performance Inputs to the Marketing Machine, I Number of Servers Hired: S Number of Store Hours, H Conversion rate, r = O/I Profits Returned per Server, Return on Servers r = Z/S Profits Returned per Hour, Return on Hours r = Z/H Output from the Machine, O = r x I Dollars of Marketing Profits, Z A better marketing manager and machine will generate more dollars of profits than an average marketing machine and manager

Called Two-Factor Machines The amount of output from the machine, O Is determined by Two Factors Factor #1) the amount of Input the machine uses, I Factor #2) the machine’s conversion rate or the efficiency of the machine’s ability to convert Inputs into Outputs, r = O/I

Many Types of Inputs Business Machines have many types of resources, investments and activities that can be considered Inputs for a marketing machine The Inputs for Marketing machines have been classified as the 4 P’s of the marketing mix Selling Price Product/Service mix Promotion/Communication mix (advertising, sales people, events) Time and Place mix (hours of operation, location, furnishings)

Any Questions? Is every one comfortable with 1)the concept of the marketing process as a machine which converts the 4 P’s of marketing inputs into outputs of profits, revenues, etc.? 2) A simple machine Machine Converts a single metric as an input into a single metric output!