If a profitability analysis reveals that the company is earning poor profits in certain products, territories or markets then it is time to look for more efficient ways to manage the sales force, advertising, sales promotion, and distribution in connection with these marketing entities.
Some companies have established a marketing controller position to improve marketing efficiency. Marketing controllers work out of the controllerâ€™s office but specialize in the marketing side of the business. At companies such as General Foods, DuPont, and Johnson & Johnson, they perform a sophisticated financial analysis of marketing expenditures and results. They examine adherence to profit plans, help prepare brand managersâ€™ budgets, measures the efficiency of promotions, analyze media production costs, evaluate customer and geographic profitability and educate marketing personnel on the financial implications of marketing decisions.
Sales Force Efficiency: Sales managers need to monitor need to monitor the following key indicators of efficiency in their territories:
1. Average number of calls per salesperson per day.
2. Average sales call time per contact.
3. Average revenue per sales call.
4. Average cost per sales call.
5. Entertainment cost per sales call.
6. Percentage of orders per 100 sales calls.
7. Number of new customers per period.
8. Number of lost customers per period.
9. Sales force cost as a percentage of total sales.
When a company starts investigating sales force efficiency, if often finds areas for improvement. General Electric reduced the size of one of its divisional sales forces after discovering that its salespeople were calling n customers too often. When a large airline found that its salespeople were both selling and servicing, they transferred the servicing function to lower-paid clerks. Another company conducted time-and-duty studies and found ways to reduce the ratio of idle-to-productive time.
Advertising Efficiency: Many managers believe it is almost impossible to measure what they are getting for their advertising dollars; but they should try to keep track of at least the following statistics:
1. Advertising cost per thousand target buyers reached by media vehicle.
2. Percentage of audience who noted, saw, or associated and read most of each print ad.
3. Consumer opinions on the adâ€™s content and effectiveness.
4. Before and after measures of attitude toward the product.
5. Number of inquires stimulated by the ad.
6. Cost per inquiry.
Management can take a number of steps to improve advertising efficiency, including doing a better job of positioning the product, defining objectives, pre-testing messages, using computer technology to guide the selection of media, looking for better media buys, and doing post-testing.
Sales Promotion Efficiency: Sales promotion includes dozens of devices for stimulating buyer interest and product trial. To improve sales promotion efficiency, management should record the costs and sales impact promotion. Management should watch the following statistics:
1. Percentage of sales sold on deal.
2. Display costs per sales dollar.
3. Percentage of coupons redeemed.
4. Number of inquiries resulting from a demonstration.
A sales promotion manager can analyze the results of different promotions and advise product managers on the most cost-effective promotion to use.
Distribution Efficiency: Management needs to search for distribution economies in inventory control, warehouse locations, and transportation modes. It should track such measures as:
1. Logistics costs as a percentage of sales.
2. Percentage of orders filled correctly.
3. Percentage of on-time deliveries.
4. Number of billing errors.
Case of DELL:
A customer-customized computer that is ordered from Dellâ€™s Web at 9.00A.M on Wednesday can be on the delivery truck by 9:00 PM Thursday. In that short period, Dell electronically orders the computer components from its suppliersâ€™ warehouses. Equally impressive, Dell gets paid electronically within 24 hours while Compaq supplying its computers to retailers receives payment days later.
Management should strive to reduce inventory while at the same time speeding up the order-to-delivery cycle. Both can be done simultaneously as shown above by Dell Computer.