Tag Archives: Cost-effectiveness analysis

Are You Using a Zero-Based Marketing Communications Strategy?

Advertising EffectivenessDesigning hard-working marketing programs is not a simple “black and white” situation. There are numerous choices, many different methods and no single optimal combination exists.

It is, in effect, a collection of ideas, approaches and options that change continually to meet changing needs, new marketing opportunities and growing competitive challenges.

There are, however, strategies to help make marketing efforts more cost-effective. These include coordinating your marketing with your direct selling, developing a zero-base budget and establishing clear, measurable objectives for every dollar spent.

THE MARKETING BUDGETING PROBLEM

“I know that half my advertising dollars are wasted, but I don’t know which half”

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Sound familiar?

For decades, companies have tried to make their marketing dollars work harder. They have used concepts such as target marketing, niche marketing and positioning to help build sales by generating leads, reaching decision-makers and even asking for the order. But a problem remains: marketing and sales have never been completely coordinated.

The result is that money is allocated to advertising because everyone knows advertising is necessary. And sales people are told go out and sell because most B2B products and services are sold that way.

This approach has worked in the past, but the changing business climate will continue to force companies to re-evaluate the entire process. To borrow a buzz-phrase, tomorrow’s marketing will have to work − not harder − but smarter.

AN OPPORTUNITY

Consider your marketing spend in terms of its contribution to profits…instead of just cost of sales

Are You Pricing For Volume or Profit?Instead of basing the marketing communications budget on projected sales, the sales requirements can be used to establish a zero-based project approach.

In this way, the actual point when the sale is closed determines what materials and how much should be spent to make the direct selling effort as cost-effective as possible.

A DIFFERENT BUDGETING APPROACH

The first step is to establish a benchmark for both the cost-per-call and cost-per-sale

Cost Effectiveness of Direct Selling Worksheet

Using the chart, determine the total cost for your entire sales force, and then the average cost-per-call and cost-per-sale. (At this stage, do not factor out individual salespeople).

The resulting numbers are a measure of your current marketing efficiency, arid will serve as a gauge of the cost-effectiveness of your total future program.

Next, using the chart below, break out your new accounts and those you have had for at least one re-order. Depending upon market factors, you may also want to break out the accounts by region, season, or some other criterion.

What you are measuring here is the cost-effectiveness of your existing direct-selling effort, looking for the types of accounts which are most profitable and those which are least profitable.

Cost Breakdown by Account TypeAs a general rule, your marketing depends upon the profitability level of each category. Those categories where direct selling is very profitable should have programs designed to support the sales person, helping to either increase the dollar volume per account, or lower the average cost-per-sale.

Those categories where the profitability level is low should have programs designed to replace the sales person as much as possible.  This can be accomplished effectively with programs such as automated marketing to lower the cost of pre-qualification inquiry fulfillment.

Once you have determined the cost-per-sale for each category, you should establish sales objectives. The first is to maximize a sales person’s productivity, and to do that requires establishing the prime job function:

  • Developing new business leads
  • Making presentations
  • Maintaining face-to–face contact at existing accounts
  • Trouble-shooting problem accounts

Do You Have A Customer Engagement Strategy?Obviously, some or all of these functions could be present in all categories, but by assigning the sales person a prime function, you are taking the first step in determining:

  1. The type of program (support vs. replacement) that will result in a lower overall cost-per-sale
  2. The message that each component in the program should carry
  3. The amount to be spent to deliver the message(s)

Given this information, you are now in a position to correlate all your advertising, promotion and direct selling expenses to sales.

Program effectiveness can now be tracked. And you can begin to consider your marketing spend in terms of its contribution to profits…instead of just cost of sales.

Good Selling!

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The Marketing Audit: Finding the Reason for Your Success

Content-AuditWhy is your company doing so well? Why is it experiencing some difficulties?

What are you doing right? And, more importantly, what are you doing wrong?

Effective marketing requires a plan, with objectives, strategies and tactics for reaching goals.

After these steps have been taken, a review of their effectiveness should be undertaken on a planned basis. This review is called “the marketing audit” and is one tool for determining your current level of success.

What is a marketing audit?

what-is-a-legitimate-loan-auditA marketing audit is a “comprehensive, systematic, independent and periodic examination of a company’s marketing environment, objectives, strategies and activities to determine problem areas and new opportunities for improvement.”

The marketing audit will also provide information for recommending a plan of action for improving performance, if one is necessary.

The marketing audit is comprehensive in that it covers all the major marketing activities of a business, not just a few weak spots.

It is systematic in that it involves an orderly sequence of diagnostic steps covering the company’s marketing environment, internal marketing system and specific marketing activities.

The diagnosis is then followed by a “corrective” action plan involving both short- and long-term proposals for improving a company’s overall effectiveness.

The marketing audit is independent and can be conducted in many ways. Self-audit, audit from across, audit from above, by a company task force, or ny an outside auditor.

Experienced  outside marketing consultants give the most accurate audits because they have the necessary objectivity and broad experience, familiarity with the industry of the company being audited, ample time, and the ability to concentrate completely on the audit.

Periodic audits benefit good companies as well as those in trouble, since few organizations can remain successful over years by maintaining the status quo.

How do you start a marketing audit?

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The marketing audit begins with a meeting between the company’s top marketing officer and the auditor. This meeting is to work out an agreement on goals, coverage, depth, sources for information, report format and time period for the audit.

A detailed plan as to who is to be interviewed, the questions that should be asked, and the time and place of contact is carefully prepared so that all costs can be kept to a minimum.

The cardinal rule of auditing is, “Don’t rely solely on the company’s executives and employees for necessary information and opinions. Customers, dealers and other outside groups should be interviewed and will usually provide the most useful viewpoints.”

After the gathering of data has been completed, the auditor will present the main findings and recommendations. Thus, the marketing audit is to determine the marketing problem areas as well as recommending ways to improve an organization’s overall performance.

Six areas to consider for an effective marketing audit

stacked reportsThe effective marketing audit covers six major areas:

  1. The marketing environmental audit analyzes forces such as demographics, economics, ecological issues, technological considerations, political factors and cultural standards. It also is concerned with customers, competitors, dealers, distributors, suppliers and other similar factors.
  2. The marketing strategy audit, reviews the company’s marketing goals and strategies to determine how well these have been adapted to the current marketing environment.
  3. The marketing organization audit calls for evaluating the ability of the marketing organization to carry out the necessary strategies based on the environment.
  4. The marketing systems audit involves examining the quality of the company’s systems for analyzing, planning and controlling.
  5. The marketing productivity audit looks at the profitability of different entities within the company and the cost effectiveness of different marketing expenditures.
  6. The marketing function audit consists of an in-depth evaluation of marketing mix components such as price, distribution, sales force, advertising, promotion and social media.

Making the audit worthwhile

The most important element in the success or failure of a marketing audit is management’s willingness to listen closely to the auditor’s final recommendations, based on the analysis of the area’s discussed.

The audit is a very important tool for a company to use in gaining a thorough understanding of its markets, and it will help a company decide what customers want and how to deliver its products or services.

This understanding of the market and all its different elements gives a company the power to reach its customers in the most efficient and cost-effective way possible.