Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata The Relationship Between Marketing and Accounting Management Chapter 10

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata Evaluating marketing activities  Marketers need to assess and measure their marketing activities; only by knowing how well their strategies are performing can they make adjustments and corrections as they are needed. 10-1

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata The marketing audit  A Marketing Audit is a comprehensive review and evaluation of the marketing function in an organisation  Marketing environment audit  Marketing strategy audit 10-2

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata The marketing audit (cont.)  Marketing structure audit  Marketing systems audit  Marketing productivity audit  Marketing functions audit 10-3

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata Marketing audit rewards  Marketers can identify problem areas  Keep abreast of changing marketing environment  Capitalise on its strong points  Spot lack of coordination in the marketing program  Allows marketers to determine performance factors  Anticipates future situations 10-4

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata Budgeting and controlling marketing programs  The budget quantifies the marketing plan  Results achieved are compared to the budget  Variances are then analysed for appropriate corrective action 10-5

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata The benefits of budgeting  Encourages a focus on the future  Measurable standards for performance, related back to marketing objectives  Forces a reconciliation of marketing goals  Makes goals ‘real’  Assists departments to cooperate  Allows for consistency 10-6

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata The budgeting process  Sales budget  Sales forecasts; bottom-up and top-down budgeting  The production budget  The marketing expense budget  Marketing expenditure may not produce sales and sales results are difficult to forecast exactly 10-7

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata Fixed, flexible and zero- based budgets  Fixed budgets are prepared for one level of activity  Flexible budgets are prepared on the basis that activity levels may change  Zero-based budgeting starts each new budget period with a blank page 10-8

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata Non-financial marketing controls  Market share – ‘budget’  Number of new products developed  Strength of brand equity  Product complaints received  Price independence  Weighted distribution achieved  Attitudes towards our brand 10-9

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata Misdirected marketing effort  The principle (pareto) 80% of the orders, customers, territories or products contribute only 20% of sales or profit, while 20% of these selling units account for 80% of the volume or profit 10-10

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata Misdirected marketing effort (cont.)  The ‘iceberg principle’ only a small part of an iceberg is visible above the water, and the submerged 90% is the dangerous part  Misplaced marketing effort–inadequate knowledge of the exact nature of marketing costs 10-11

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata The evaluation process  Finding out what happened  Finding out why it happened  Decide what to do about it 10-12

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata Sales volume analysis  A sales-volume analysis is a detailed study of the net sales section of a company’s profit and loss 10-13

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata Market share & cost analysis  A market share analysis is used to compare its sales with those of the industry.  Marketing cost analysis is used to determine the relative profitability of its territories, product lines or other marketing units 10-14

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata Analysis of activity expenses – costs by product or market  Marketing costs should be allocated among the various marketing activities, such as advertising or warehousing, for more effective ledger expense control  Marketing cost analysis is a study of the costs and profitability of a product range or segment 10-15

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata Full-cost versus contribution- margin approach  Operating costs can be divided into direct and indirect expenses. Direct expenses (separable expenses) are those incurred totally in connection with one market segment or one unit of the sales organisation 10-16

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata Full-cost versus contribution- margin approach (cont.)  Proponents of the full-cost approach contend that a marketing-cost study is intended to determine the net profitability of the units being studied  Contribution-margin supporters contend that it is not possible to accurately allocate indirect costs among product or market segments 10-17

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata Taking corrective action  Territory decisions  Product decisions  Customer and order-size decisions  KPI’s – accounting reports can be used to measure specific aspects of marketing performance  The first line in a Profit and Loss statement records the gross sales-the total amount sold by the company 10-18

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata KPI’s  Net sales–represents the net amount of sales revenue  Cost of goods sold (cogs)–net sales less cost of products = net profit  Gross profit–Net sales less cogs  Expenses–marketing, admin and misc expenses  Net profit–difference between gross margin and total expenses 10-19

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata Mark-up and gross margin  Mark-up percentage Mark-up % = dollar mark-up cost  Gross margin Mark-up % = dollar mark-up selling price 10-20

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata Analytical ratios  Financial ratio analysis  Gross margin percentage  Net profit percentage  Expense to sales ratio  Stock turn rate  Markdown percentage  Average collection period  Return on investment (ROI) 10-21