Only closing the sale makes the money

For any business, the fact is that only the ability of sales people to close a sale, actually produces the income on which the business depends, despite what some may think about the importance of brand, image, advertising, social media. All the various elements of what is known as the “Marketing Mix” are necessary contributors, but without the act of selling and closing the sale, those elements are irrelevant.

Selling is the foundation of business. But some people have a wrong attitude about the process or profession of “selling”. There are those who consider that, to be a salesman, (male or female), is demeaning, that the process of “selling” makes people buy things they don’t want. But commerce and economic well-being depend on selling. When Governments want to grow the economy, they often forget that in order to generate national income, people have to work harder to be more successful at selling goods or services, in order to produce the income.

Selling is a business skill of which many professional marketers have little or no experience. To be successful in selling relies on the ability to identify a customer’s need, to understand their underlying problem and to provide a solution that overcomes the problem and satisfies the customer’s requirement. Successful sales executives also require a personal confidence to meet new customers, and not be put off by the rejections that inevitably occur. Selling can be a lonely business, which requires careful management to ensure that sales staff are properly directed, trained and motivated, because the future of the business depends on their success. Sales executives often operate in a more isolated and exposed position than others in a company, and without sensitive and effective management, may tend to “Game the system” for their own benefits rather than that of the business.

Selling is more successful if the customer comes to the supplier with the intent to buy, than if the supplier goes to the customer with the intent to sell. In most consumer markets, potential customers are largely self-selecting in that they choose to enter the selling arena of a shop or a web-site. By so doing, potential customers indicate that they have an initial interest in the product or service on offer, even if they are not disposed to buy at that time. The sales assistant may then guide the customer to the product required, thus securing the sale. The action of selling is the only business activity that brings money into a business. Thus, the effective management of the selling process is fundamental to ensuring that costs, investment and use of assets are minimized, while the level of profitable income is maximised.

The art of successful selling lies in differentiating at an early stage, between those who are there to buy, those who would buy if they recognised that they had a problem that could be resolved to their advantage, and those who while they show interest and curiosity, are simply not in the market to buy at that time. For the manager responsible for managing assets and resources for producing sustainable profitable income, often the most expensive part of producing income is prospecting for future sales. How much money should be invested in “bid and proposal”, is an important question.

Traditionally, selling to the customer has been done on a personal basis by trained sales personnel who control the selling process. There are now many businesses that do not use personal selling to provide their income, but rely on other impersonal means, such as through the internet, direct mail, catalogue or social media. Such methods reach many more potential customers than direct personal selling, and are suitable for many consumer low cost products. However, personal direct selling is more suitable for high value consumer and business to business products and services.

Considering that successful selling is fundamental to the producing of profitable income, it is important for commercial managers, to understand the actions involved in generating customer interest and its conversion to income producing sales, in order that the process is effectively managed.

The process of making a sale may be broken down into four principle actions;

Engaging the attention of the potential customer.
Establishing the customer’s interest.
Developing the customer’s desire for the product or service.
Guiding the customer to easily complete the purchase.

These actions form the basis of every professional sales person’s approach to making and completing a sale with a customer. Making potential customers aware of products and services and thus encouraging them to come and buy, tends to be more cost effective than trying to sell to prospective customers who may not be initially receptive to a sales approach. The best salesmen don’t sell, but recognise those customers who want to buy.

The continuous flow of income, which businesses need for their long-term future, is derived from sales. No sale,- no income. No income, – no business. Thus the ability to sell is of primary importance to the success or failure of a business. Effective selling is fundamental to producing business income, but only effective management can make sustainable profits from that income, for the long-term future of the business.

July 29, 2025 Posted in: business development, business efficiency, Business Marketing, business performance improvement, business performance indicators, business performance management, business performance measurement, marketing management, marketing metrics, marketing performance measurement, marketing ROI, performance measurement indicators, Uncategorized Comments Closed

Can Marketers Manage?

The text of a recent CIM podcast entitled Why marketing’s boardroom absence is bad for business , makes interesting reading, with a feeling that we have been here before. In January, 2008 “Marketing” magazine published an article entitled “Marketers Lack Influence in the Boardroom”, revealing that 73% of CMOs believe their businesses undervalue marketing strategy. This strategic disconnect isn’t an anomaly; for the third consecutive year, the survey identifies marketing strategy as the most undervalued function by peers.

A further revelation indicates that less than 30% of marketing professionals possess formal training in the discipline. This significant knowledge deficit has contributed to weakened strategic thinking and decision-making, and consequently diminished marketing’s credibility at the boardroom level. To address these problems the CIM have developed the Global Professional Marketing Framework, of necessary skills that define what it takes to be a competent, proficient, and relevant marketer.

As defined by The Chartered Institute of Marketing (CIM), marketing is “the management process that identifies anticipates and satisfies customer requirements profitably”. Thus marketing is a management process, not another name for advertising or selling.

“Are Marketers suitable managers of marketing?”, is an interesting question. In theory marketers should be responsible for all those activities that “anticipate and satisfy customer demand profitably.” In practice, this is often not the case. While the other main elements of business, such as finance and production are managed by senior managers with overall responsibility for their respective areas, that of marketing, which is the driving force in producing the business revenue, is frequently not managed in that way at all.

Examination of the marketing press would suggest that many marketers have a different perspective of marketing and their responsibilities. One has only to see that the predominance of articles in the marketing press that revolve around customer relationship management (CRM), brand, advertising, product perception and public relations. There are also occasional articles on selling, but rarely on sales management. Very little is published about the management of marketing. Many marketers seem to have lost the understanding of marketing from the CIM’s definition of a management function, and view marketing on a narrower description, mainly denoting customer relations and different forms of communication and promotion. It would seem that for many, the role of senior marketing or commercial manager as being responsible for the generation of sustainable profitable revenue is not something that they would recognize.

When it comes to measuring marketing performance especially the return on investment (ROI), many marketers often confine their interest to measurements involved with CRM, advertising, promotion and brands. While measurement of performance in these areas is important for those executives who are the managers in charge of them, they are not indicative of the overall marketing performance. Individually these separate areas of marketing activity are not responsible for generating revenue. Even the sales organization is not solely responsible for bringing in the revenue, for while sales may ultimately close the sale, its performance is supported by all the other disciplines of marketing, which collectively assist in making successful sales result.

“If you can’t measure it, you can’t manage it,” applies as much to the marketing function as it does to every other part of business. However, it does not mean that if you can measure it, you can manage it. Measuring marketing performance does not guarantee good management, but is an indicator of management performance. For too long, many marketers appear to be fixated by branding initiatives, image and other aesthetics. The challenge for marketers is to present marketing performance measurements to the CEO and the management team in financial terms that they understand, like contribution and Return on Investment (ROI). Marketers must be able to quantify and demonstrate the contribution of the marketing function as a whole to the business, both for the immediate and the long term, and not confine themselves to their own particular specializations. Should they seek to be in senior level appointments, then marketers will have to prove themselves be good leaders, managers and motivators, able to think strategically for the long term development of the business.

Businesses exist to make money, produced as a result of satisfying customer demand. Producing profitable income requires the effective management of all those resources and the necessary assets involved in producing and delivering a product or service to a customer. But what are these resources and assets? Generally, those resources are defined in financial terms as the money allocated to budgets for the specific activities involved directly or indirectly with producing income. Tangible assets involved in getting and maintaining income are usually limited to wholly owned and dedicated IT hardware related to the administration of selling, and wholly owned business vehicles dedicated to customer liaison and delivery.

It is generally understood that the majority of marketers only stay in post for 18 months to 2 years, thus their outlook is essentially limited. Business and marketing plans are normally prepared as a five-year rolling plan with annual reviews. To be effective, such plans need long term management. Frequent changes of management are not compatible with the effective execution of such plans

The objective of a commercial manager is to deliver a continuity of sustainable profitable revenue. However, if marketing is the main revenue driver of a business, it requires planning and management for the long term, to provide the necessary continuity of sustainable revenue. If marketers want to have overall charge of all the business getting and retaining functions, they must learn to measure, manage and report on the performance of marketing as a whole, and in a way that is compatible with other areas of the business. In particular, aspiring marketers must demonstrate a long term commitment to the organisation. In short, marketers must learn to be effective managers of the whole of the marketing function for the longer term, not just specialist areas for the short term, if they want to be regarded as professional managers deserving of a place in the boardroom.

June 25, 2025 Posted in: business development, business efficiency, Business Marketing, business performance improvement, business performance indicators, business performance management, business performance measurement, marketing development, marketing management, marketing metrics, marketing performance measurement, marketing ROI, performance management, performance measurement indicators, Uncategorized Comments Closed

Marketing Professionalism

A recent survey by the Chartered Institute of Marketing, as reported in its on-line magazine Catalyst, makes interesting reading.

The survey suggested that trust across all areas of business is more important than ever, but with nearly half (45%) of business leaders having reservations regarding the level of professionalism across marketing, HR and sales functions. Concerns over marketing’s professionalism were the highest among small business leaders, with nearly a fifth of respondents (18%) ranking it as the lowest business function, with medium-sized firms (50 to 249 employees) coming in second at 15%. The findings indicate that small and medium-sized businesses are suffering from a lack of confidence in the level of professionalism from within their marketing assets, thus highlighting the importance of continued investment in continuous training with the latest professional certification.

What does” having reservations” regarding “marketing professionalism” actually mean?

Employers naturally expect that their employees will do what they are paid to do, but how well they do it is a different matter. With many marketers only staying in a job for not much more than two years, their apparent mobility gives rise to the questioning their professional commitment to their employment position.

The purpose of every business is to make money, yet many marketers seem to confuse the need to spend money on marketing communications and customer relations, with the overriding need to generate profitable income. The responsibility of every commercial manager is to produce and maximise sustainable flow of profitable income for the long-term future of the business, while minimising the use of investment and resources. Businesses look to their commercial managers and marketers to identify where resources should be directed, as well as how those resources should be used to generate profitable income. Commercial managers need to justify their decisions with measurable performance results, in order to gain and maintain the confidence of the business management.

Professional qualifications are important, in that they show a baseline of study and understanding. However, marketers need to demonstrate their ability to apply marketing theory to producing practical results. which is the key to business confidence and success. Ultimately an employer will evaluate a commercial manger or marketer on their ability to produce quantifiable results, and their contribution to profitable income.

Clear Job descriptions are important to ensure that the employee knows what they are employed to do and what is expected of them, and while such descriptions should not be too prescriptive, they should also include clear responsibilities and reporting lines.

Measuring performance is fundamental to successful management and the use of management ratios are a tried and proven method of achievement.

To demonstrate contribution, marketers need to consider:

What information does the Chief executive need to know about the performance of the Marketing function?
what specific management data and metrics are required for analysis and decision making?

For the commercial manager, there will be a different and more extensive range of data, as would be required by one directly involved in managing the marketing budget.

Each management decision making level will have a set of reporting data in order to monitor and manage their responsibilities. As each level collects data for its own management control and decision making, as well as for passing to the level above, so it becomes possible to establish an information data chain that extends from the lowest point, e.g. the customer/sales interchange to the chief executive. Through this chain of information data, the chief executive should be able to trace the connections from a marketing metric through to the causal area or actions.

In the main, chief and senior executives will be interested in metrics and benchmarks, rather than pure measurements. This is because metrics are the standards for measurement, providing target values that a company must achieve to reach a certain level of success. While measurements are the raw outcome of a quantification process, such as a company’s numbers, ratios and percentages, benchmarks on the other hand, are the very best measurements to which to aspire, the standard by which all others are measured. In most cases, benchmarks are therefore used to establish the value of metrics to be used for measuring satisfactory performance, at any particular time

All marketing requires investment, so the effectiveness of marketing management must be clearly demonstrable to senior management, to further the internal understanding of the business’s marketing effort and justify the investment. For the commercial manager, metrics of marketing contribution, return on marketing investment and the “Optimum Marketing Performance,” will provide a performance picture of the marketing function which may be compared to the metrics of the other business doing, and finance areas of the business. The question of in what form, information is reported, is important to ensure information and data are prepared in a manner intelligible to the demander and comparable with data from other sources.

From the professional marketer’s point of view, measuring marketing performance allows them to prove their worth by measured results. Measuring performance should not therefore be a feared system of monitoring, but be seen as a tool of management efficiency by which all performance may be judged and rewarded.

Professionalism in marketing, as in any other business management process, derives from commitment to the organisation, working to achieve the business objectives and the use of quantified performance measurements to demonstrate achievement.

June 1, 2025 Posted in: business development, business efficiency, Business Marketing, business performance improvement, business performance indicators, business performance measurement, marketing development, marketing management, marketing metrics, marketing performance measurement, marketing ROI, performance management, performance measurement indicators, Uncategorized Comments Closed

When sales are down, what do you do?

The current turmoil in the international trade and financial markets is having an adverse effect on business confidence and inflation everywhere. At all levels, business and commerce is being negatively affected by this situation. How should businesses both large and small whether the storm?

Whether the economy goes into recession or remains in a period of very low growth is unknown. What is certain is that the change in the economic climate will affect all those involved in producing income. How marketers react to these changed conditions will be important both to the individuals concerned and to their companies.

Large companies have the advantage of size and resources, which small and medium sized operators do not possess. However, it often takes longer for large organisations to adapt to changing conditions, while smaller businesses being more flexible are often quicker to adapt.

As the economy slows, so customer demand is likely to fall, affecting the ability to achieve revenue targets. At the same time, the increase in the cost of overheads in the form of power, fuel and commodities, is reducing profits. The result of these effects means that businesses start to look for economies in their budgets and to reducing costs wherever possible

Cutting costs is often a simplistic answer to more complex problems that are manifested by falling profits. Rising costs may result from a weak control of expenditure, or increased inefficiency through poor management which reduces profitability. But when falling profit results from falling sales, a reappraisal of the business strategy and operations is the right approach rather than a panic call to cut costs.

Before taking action to reduce costs, a careful analysis of expenditure and contribution is required. Unnecessary expenditure that does not directly or indirectly contribute to income production are costs which directly eat into profits, which derive from income.

Income is derived from sales to satisfied customers. Any decline in sales and income need to be investigated and the reasons understood, before any remedial action is undertaken.

Reduced sales result from reduced demand. Reduced demand results from either;

The customer base no longer has the problem that requires the product as a solution.
The product package is no longer satisfying customer’s requirements and expectations.

Business success and survival relies on maintain and maximising profitable income. Having an effective sales team that interacts with customers, provides insight into their requirements and changing needs, which an increasing reliance on on-line communication, chat box and artificial intelligence (AI) cannot provide.

The objective of the commercial manager is to generate and sustain a continuous stream of profitable revenue for the business. Understanding where costs and investments are incurred and how they contribute to producing profitable income is essential. Businesses may consider themselves to be lean and efficient, but expenditure tends to increase over time for no apparent growth in contribution to profitable income. For this reason, all expenditure should be continually monitored, and closely managed in order to maximise profitable income.

Commercial managers need to understand:

has the market changed?
what is affecting demand?
does the product no longer meet the majority of customer requirement?
is the sales strategy and operation still effective?

All activities involved in getting and retaining business should be continually monitored regarding their costs, benefits and contribution, in order that they might be effectively managed, but the question is – are they? Is there a clear understanding of all those activities which although they do not in themselves produce income, such as advertising and promotions, are important contributors to its production.?

Attention to detail is essential for good service and customer retention. Customers buy not only the product, but its reliable delivery and communication with the supplier. The reliability of the service and communication can often be the deciding factor that retains a customer rather than the product itself. Commercial managers should review all the activities which collectively contribute to satisfying customer requirements, that constitute the product package as perceived by the customer and on which they rely: these include:

Ware-housing – Is it sufficient to support timely supply – how do you know.?
Distribution – Is it efficient and effective – how do you know?
Advertising – Is it the right message, to the right audience on the right media?
Promotion – are promotions relevant and cost effective?
Web-site – is it up to date and easy to use by the user – Have you tried it?
Selling – are sales staff well briefed and trained?
Sales office – are staff polite efficient effective with dealing with customers?
Customer communications – do customers have easy access via telephone, mail, e-mail and web-site? Are all enquiries answered promptly, – how do you know?

As the economic situation changes, Commercial managers may need to do things differently. How quickly they can adapt to the changing environment and satisfy the need of their customers will determine how well they succeed in producing profitable income for the long-term future of their business.

May 6, 2025 Posted in: business development, business efficiency, Business Marketing, business performance improvement, business performance indicators, business performance management, business performance measurement, marketing development, marketing management, marketing metrics, marketing performance measurement, marketing ROI, performance management, performance measurement indicators, Uncategorized Comments Closed

Price dictates profit, demand dictates price

All businesses at some-time or other are subject to variations in their volume of sales and level of income. Depending on the type of business undertaken, most commercial organisations would recognize that there are trading or sales cycles during the course of their trading year. In many consumer businesses, the run up to Christmas is a major trading period of high sales and income. However, January tends to be a slacker trading month, usually enlivened by “sales” which increase volume, but with discounted prices that reduce the level of potential income.

It is a mistake to assume that the upward trend in sales and profits will always continue, or to base planning on that assumption. Forecasting the future based on past performance is always a problem. Are the conditions the same, improving or worsening? Where is the evidence?

To be successful the commercial manager needs to remember that while income can go up as well as down, they also need to understand why. What are the underlying factors? Markets and demand are finite, customers’ requirements change, markets get saturated, and both products and services have a finite life.

Supermarkets seem to be in a perpetual price war between themselves. For many years the major supermarkets have enjoyed annual increases in turnover; like for like sales and overall profits. Now those same supermarkets are reporting falling sales and profits, while their managements are trying to understand why this has happened and what to do about it.

In the past, there were “sales” seasons, where discounting to a “sales” price was used essentially to clear old stock to make way for new products. Traditionally, price reductions have been used to increase sales as part of a special promotion, or perhaps to initiate a product launch.

Discounting has long been used as a favoured method of sales promotion. However, when over used, discounting can have serious negative consequences. Firstly, it distorts sales figures by increasing sales during the discount period, and reducing sales when returning to normal pricing. Secondly, overuse brings an expectancy with the customer, such that they withhold purchase until there is a discount and then over purchase, to avoid paying the standard price. This action over time makes the discounted price the effective actual price, making it difficult for the supplier to return to the required price and profitability.

Fair and profitable pricing has always been a difficult subject. The accepted theory is that products should be priced at the highest level that the market will bear, but the reality of pricing is not that simple. Pricing on the basis of costs plus a required margin, ignores what the market is prepared to pay, so that the product is either under-priced, thus increasing volume but decreasing profitability, or it is overpriced decreasing potential sales and total potential profits. Achieving an ideal price for a product that produces a targeted rate of return is far from easy, especially as emphasising a rate of return in price setting, often ignores market and customer requirements to the detriment of the business.

Price is that value which the purchaser is prepared to pay for a service or commodity, and is not related to cost. Cost is the sum of materials, labour and overheads in the production of the commodity or service. If the cost of a product or service exceeds the price that the market is prepared to pay, then the product or service will fail. It follows that accurate costing is essential only to establish the level of profit that can be obtained from the price of the product or service. In practice, when margins are low, small movements in price, volume and cost tend to have a magnified effect, but when margins are large, they have diminishing effects on profitability.

Improving profitability by 10 or 20 per cent can be a tall order, especially in businesses where profit margins are small. In such cases, the answer is often given to cut costs and to increase sales, both of which are easier said than done, especially if the demand is for say a 10 per cent cut in costs, or a target of a 10 per cent increase in sales. In fact, an increase in sales may well incur an increase in costs, so the answer is never simple.

Small incremental changes to operations are much easier to effect than large ones. It is much easier to cut costs by 1 per cent than it is by ten percent. Similarly, it is much easier to make a price increase of one per cent than ten percent, as a one per cent change is hardly noticeable by the consumer and therefore easily acceptable. Likewise, increasing sales by one per cent is much easier to attain than trying to attain a ten per cent increase. It is important to realize that the accumulated effect of small changes can result in a much bigger result, such that a 1% increase in volume with a 1% increase in price, and with a 1% cut in variable costs results in almost 24% increase in profits.

While lowering price through discounts can increase volume, it does so at the expense of profitability. Used too often, price reductions can devalue the value of the product in the perception of the customer, so that they are unwilling to pay the original price when the discount ends, thus reducing demand and income. While Price dictates profit, demand dictates price.

April 7, 2025 Posted in: Uncategorized Comments Closed

Price dictates profit, demand dictates price

April 4, 2025 Posted in: business development, business efficiency, Business Marketing, business performance improvement, business performance indicators, business performance management, business performance measurement, marketing development, marketing management, marketing metrics, marketing performance measurement, marketing ROI, performance measurement indicators, Uncategorized Comments Closed

The Golden Rule

The Golden Rule states that “he who has the “gold” makes the rules”. The rule applies both to politics as well as commerce, but the “gold” need not be money, but can equally refer to resources, manpower or knowledge etc.

In business in recent years there has been a concentration on “the bottom line” and the return on investment as shown in share prices. This is in part understandable, as shareholders provide the capital necessary for a business to be created, and need to see a return for their risk taking and investment. While shareholder investment is essential as the capital basis of any business, it is a false premise to think that shareholder investment is “the gold that makes the rules”.

The basis of any business is to make money by providing goods and services to customers who have specific needs. Proft comes from sales, and sales come from customers. Profit benefits the shareholder, but also the workforce, without whom the product or service could not be provided. Profit also benefits the business, enabling re-investment.

To be successful, every company requires three types of assets; investment capital, a product or service, and employees capable of operating the business. Of these assets, arguably the most important are the employees, because they use the resources of capital and product to satisfy customer requirements and by so doing produce the income which provides the profit which benefits the shareholders.

The customer’s requirements must be serviced by the development and production of products which are priced at a level that the customer is prepared to pay. Social media, advertising and publicity all assist in creating awareness, interest and possible desire for a product with a potential buyer, but only the action of closing the sale actually brings in the money, However, until the product or service has been delivered to the customer to their satisfaction the transaction is not complete. Getting the sale and the payment may be a straight forward process, which secures immediate income for the short term, but if customers are not satisfied with the delivery, specification, payment process, product support and general attitude of the supplier, a hard-won customer may be lost to future repeat sales. A satisfied customer is a good ambassador for any supplier, but an unsatisfied customer is not only lost, but their communicated experience can damage a supplier’s reputation and image.

The commercial manager responsible for getting and maintaining profitable income, needs to ensure that the relationship between a supplier and its customers is the principal influencer of the customer’s satisfaction, loyalty and repeat business. While obtaining sales income is a prime objective of the sales team, customer satisfaction should be at the centre of all those other activities that support the customer, such as production, service support, distribution, payment and credit control. This requires the effective management of all those activities which directly and indirectly effect customer relations. Only concentration on customer service and satisfaction can bring long term benefits of customer retention and profitable income for the future,

Arguably the most important business asset are experienced and knowledgeable employees who have a deep understanding of their customers and their requirements. Retaining and developing experienced and knowledgeable employees should therefore be a priority for the commercial manager.

To that end, the commercial manager should:

Ensure that all employees understand that the business is there to make money, and that their individual efforts are fundamental in satisfying customer requirements profitably.
Ensure employees have the authority and parameters in which to make their own decisions, without needing to get prior approval.
Encourage employees to express opinions on how improvements may be made in satisfying customer requirements while maintaining and improving profitable income, and rewarding beneficial ideas.
Communicate with employees frequently, and speak directly with individuals. Employees need to know that they are valued, and direct personal communication is a good way to show appreciation for their hard work.
Ensure that pay should be regarded as an asset investment. As far as possible, pay should be at least, or above, the market average in order to aid both recruitment and retention.
Offer training that provides for career development and future promotion.

In the past, many businesses have often been product or service orientated, and have suffered because they have not been sufficiently aware of their customers’ needs and the changing trends in their market. In more recent times, businesses have become financially driven, often becoming fixated with “the bottom line” and the level of short term and immediate profit. However, this financially driven attitude concentrating on the profit objective, often tends to ignore the fact that it is the customers who provide the income, and the employees who make it happen.

Generally, it is ability to maintain the reliability of the product and service that retains customer’s loyalty and their willingness to continue to purchase. Thus, being aware of all those activities which directly and indirectly affect the delivery of the product or service to the customer is a fundamental to ensuring customer satisfaction and retention.

Retaining dedicated motivated and knowledgeable employees is essential, if customers are to be satisfied in their purchase of goods and services. Only Satisfied customers provide the income, if customers are not satisfied, they will take their custom elsewhere together with their money. Ultimately customers make the rules for their satisfaction as they possess “the gold” which the business seeks.

March 6, 2025 Posted in: business development, business efficiency, Business Marketing, business performance improvement, business performance indicators, business performance management, business performance measurement, marketing development, marketing management, marketing metrics, marketing performance measurement, marketing ROI, performance management, performance measurement indicators, Uncategorized Comments Closed

Is your marketing a success or failure?

Is your marketing a success of a failure? How do you know? It depends first on how Marketing is defined. The Chartered Institute of Marketing defines marketing as “the management function that anticipates and satisfies customer demand profitably” and not an alternative word for advertising, promotion or sales.

The objective of marketing as a management process is the maximisation of profitable income for the benefit of shareholders and the workforce on which the business depends. Establishing the success or failure of marketing, requires firstly establishing the commercial objectives in a quantified manner, the level of necessary investment and the level of return. It requires using resources and investment efficiently and effectively, which requires planning and measurement to establish results for effective management.

Many Commercial managers use data on sales, market share, customer satisfaction, customer retention and customer profitability as their performance indicators, but this information is of limited value when considering the return on Marketing investment. Marketing is much more than the advertising budget, and to measure the return on marketing investment requires a deeper understanding of all the activities which go to satisfying customer demand profitably.

Every business wants to maximise its production of profitable income, and therefore need to measure its performance in terms of inputs and outputs, in order to understand how it may be improved. As marketing activities require investment, so commercial managers need to justify their activities and budgets through measuring marketing performance in similar terms. Establishing the Return on Marketing Investment across the whole business getting function requires the understanding of the various activities that drive sales and generate income. Measuring the Return on Marketing Investment (ROMI) is generally limited to a specific marketing investment such as an exhibition, but as it is difficult to identify which sales are attributable to which activity, it does not readily apply to the marketing function as a whole.

The prime measurement in any business is one of output. While measuring Sales revenue is relatively easy, establishing the total direct and indirect costs of marketing requires a detailed understanding of the full extent of marketing activities, which many businesses find difficult to define, and from which they habitually fail to collect the relevant data. Measuring “Sales Revenue” is therefore insufficient to measure marketing performance, as it does not relate to profit. “Profitable revenue” which is the measure of Marketing output, is known as the “Marketing Contribution”. Marketing Contribution, expresses marketing output as derived from the revenue generated less the direct and indirect costs incurred by marketing activity.

For the commercial manager, the objective of efficient marketing management is to maximize profitable sales revenue, while minimizing marketing costs and the marketing assets used. To have equal importance with other management performance indicators, marketing requires a single indicator which encompasses the overall performance of the marketing function. Such a single indicator enables fluctuations in performance to be easily seen, and allows comparison with other business indicators such as Return on Assets, Stock turn, productivity etc. The Optimum Marketing Performance (OMP), is the particular indicator which encompasses the overall marketing performance by directly relating revenue with Marketing investment. Thus, the efficiency of the Marketing function in managing its costs and resources in the generation of profitable revenue, can thus be expressed as a single figure as the OMP which is expressed as:

Marketing Contribution/Marketing Assets

Establishing the OMP for any business requires the detailed understanding of the marketing budget, and the way that marketing generates business and money. For many businesses, the marketing budget covers little more than advertising and sales expenditure. However, since Marketing, includes all those functions which anticipate and satisfy customer demand profitably, most activities which are neither purely financial nor production, tend to be marketing related. Calculating the OMP requires careful analysis of quantified performance data from all of the activities involved in the satisfaction of customer requirements. The OMP expresses the overall marketing performance by directly relating revenue with marketing investment. While the principle of establishing the OMP is the same for every business engaged in profit generation, the detail and method may vary in different types of business, e.g., consumer, industrial, business to business, long term contracts, consultancies, and financial.

Together, marketing contribution and the OMP define the performance of the Marketing Function in a way that can be directly related and compared to the performances of both the Finance and Business Doing areas and to the business as a whole. When used on a frequent and regular basis, the OMP and Marketing Contribution ratios allow continual assessment of the marketing function’s use of resources and return on investment. Fluctuations and trends can be easily identified in the overall performance, which prompts enquiry and analysis for the causes of change whether positive or negative. Although there are many and varied measures of aspects of marketing performance, only the values of Marketing Contribution and the Optimum Marketing Performance give a clear measurement of marketing success. However, to get a true picture of performance, both these indicators must be viewed in context of other management indicators from elsewhere in the business and not in isolation.

Ultimately, if you don’t measure marketing performance, there is no way you can demonstrably improve marketing efficiency, effectiveness or return on investment.

Contract Marketing Service

www.businessperformancemaximized.com

January 28, 2025 Posted in: business development, business efficiency, Business Marketing, business performance improvement, business performance indicators, business performance management, business performance measurement, marketing development, marketing management, marketing metrics, marketing ROI, performance management, performance measurement indicators, Uncategorized Comments Closed

Prepare for difficult times ahead

The economic situation for 2025 looks to be varied across the world. In the United States, the economic situation seems to be increasingly buoyant with the advent of the new administration, while the situation in Britain and Europe suggests that a recession is likely.

Most of the market trends that started in 2024 are likely to continue into the New Year. However, there are some events which will make a difference to the economy and therefore to market conditions, such as the level of demand, which will affect the level of profitable income.

The responsibility of every commercial manager is to produce a sustainable flow of profitable income for the long-term future of the business, which is produced by the getting and retaining of customers’ business. Thus, the subject of investment has a particular importance for commercial managers as they are assessed on their ability to maximise profitable income while minimising costs, investment and the use of assets.

With any downturn in business activity, there is always a demand to cut costs, which can often be directed to the business getting area. At a time when demand is reduced, everyone has to work harder and maximize efficiency to ensure the continuing production of the necessary revenue. It follows that arbitrarily cutting expenditure on all those activities involved in getting and maintaining business may damage the ability to produce revenue, especially at a time when competition is likely to strengthen when demand is weakening.

In such circumstances commercial managers should consider various actions, for example:

Be pro-active rather than reactive in reporting the performance and efficiency of the marketing function.
Ensure that the achievement in relation to the current marketing plan is analysed and reported,
Ensure that if the marketing results are “off track”
- Analysis is undertaken to understand the reasons
- Reasons for over performance as well as under performance are understood.
- Prompt remedial action is taken when necessary.
Be prepared to move to a contingency plan if the situation requires it.
Understand the extent and detail of what is actually included in the marketing budget, i.e. all those elements involved in generating revenue by satisfying customer demand, some of which may lie outside the official marketing budget.
Continually analyse and assess the value of all marketing expenditure in terms of its contribution individually or collectively to the generation of sustainable revenue.
Use quantifiable analysis wherever possible and avoid qualitative data.

However, if commercial managers wish to avoid cuts to their budgets, they will have to refine their programmes so that there are measurable results. To be effective, a commercial manager should be able to justify all the elements of the marketing budget with quantified evidence of its contribution to revenue production. They must be able to identify those activities which are the most cost effective in marketing contributions and which are not. If necessary, resources should be redistributed to concentrate effort on those areas which provide the best return on marketing investment.

Commercial managers need to ask;

Is this an investment or cost?
What does it contribute? How do we know?
If this action was cut or reduced what would be the consequences? How do we know?

A full understanding of the cost, benefit and contribution of all marketing activities to the generation of sustainable profitable revenue gives the commercial manager a strong position when defending against arbitrary budget cuts. Such knowledge ensures that if such cost cuts are unavoidable, that they can be confined to activities which will do the least damage to the production of sustainable revenue.

While a recession is generally a period of reduced demand, revenue and profit, it can also be a time of opportunity and creativity.

Do market conditions dictate a change in how the market is accessed and satisfied?
Would a review of marketing processes reveal alternative methods that could prove more efficient and cost effective?
Is there a change in customer demand that requires a new product?

Probably the most useful action of a commercial manager during difficult trading times is that of Scenario Planning. Few businesses do scenario planning well, but while it takes time, it can be a very useful insurance policy against the unexpected situation.

Possible scenarios that the commercial manager should consider in difficult economic times;

Prime contracts fail to materialize, or are reduced.
Key customers seek to price reduction or longer credit.
Increase in payment defaults.
Increase in aggressive activity from competitors.
Forced reduction in the marketing budget and resources.
Adverse Government legislation.
Difficulties in maintaining necessary supplies.

While some of these possible scenarios may seem unlikely, in difficult economic times, none are impossible. It is the task of the commercial manager to produce and maximize the profitable income on which the future of the business depends. When considering what lies ahead in 2025, commercial managers should consider scenario planning as an important management tool.

@ N.C.Watkis 31 Dec 24

Contract Marketing Service

www.businessperformancemaximized.com

January 1, 2025 Posted in: business development, business efficiency, Business Marketing, business performance improvement, business performance indicators, business performance management, business performance measurement, marketing development, marketing management, marketing metrics, marketing performance measurement, marketing ROI, performance management, performance measurement indicators, Uncategorized Comments Closed

Successful Marketing requires knowledge and measurement

When the late Lord Weinstock was chairman of GEC, it was generally considered one of the most efficient British companies of the 1980’s, known for its profits and cash mountain. The story goes that it was Lord Weinstock’s daily habit, to ask each of his main managers, how much money they had made that day. The story may be apocryphal, but the principle is that in having regular management reports of their business progress, the managers were reminded of their responsibility for making money for the company .

The sole purpose of any business is to make money. To make money, a business needs to identify, anticipate and satisfy customer requirements profitably. Marketing as defined by the Chartered Institute of Marketing, is “the management process that anticipates and satisfies customer demand profitably” By this definition, it is clear that “marketing” in any business, is as the fundamental management process which generates profitable revenue through customer satisfaction. The responsibility of the commercial manager, is to produce the profitable income on which the business survives for the long term future .

For effective marketing management, there is no substitute for the quantitative measurement of marketing performance. After all, it was Peter Drucker who said that “If you can’t measure it, you can’t manage it.”

Measuring marketing performance highlights the ability of the management to convert marketing investment into profitable revenue. Thus marketing measurement provides a quantitative indicator not only of the efficiency of the marketing function, but also of the effectiveness of those individuals responsible for marketing management and generating profitable revenue.

Having a continuous flow of marketing performance measurements, enables the marketing manager to understand the current performance, but there is an equal requirement for a continuous input of market, economic and business environment information, so that the progress of the business may be seen in the external business context. If for example the marketing performance indicators showed that revenue profits and customer growth were all growing at 6%, that would show a positive management performance. If however, external information showed that the market was growing at 10%, then the relative performance of the marketing management would be considered unsatisfactory.

. But to be effective and to maximize the opportunities for income, commercial managers need to be aware of the threats and opportunities that continually arise from events and developments in the business environment, for example, fashion and technology. But there are also events which may not be obviously predictable, but which may give rise to new opportunities or alternatively, produce unexpected threats to the income supply or to business operations in general.

Commercial managers should evaluate the business operational performance in terms of:

Orders: number, average value, total value
Enquiry/quotation conversion rate
Quotation/order conversion rate
Analysis of lost orders
Order/delivery time
Invoice to payment time
Total marketing cost per order
Operating Profit
Net Profit/unit sale
Debtors/sales
Stock Turn
Growth in Customers

Where commercial managers do not have senior executive responsibility for generating revenue, they must be the providers of all the quantified “sales and marketing” information on a continuous and regular basis to the senior decision makers. Reporting data for the sake of it is counter productive and wasteful. Always the commercial managers must ask “What do we need to know? Who needs to know? For what purpose is the information required and in what form will it be needed?” commercial managers must ensure that those decision makers have suitable performance indicators in order to prompt the necessary questions that enable informed decisions to be made.

In order to keep the corporate knowledge base accessible and up to date, commercial managers should undertake on a regular basis, a detailed “Commercial Audit”, or “Marketing Audit” as it was more frequently known. The purpose of such an audit is to establish the depth of knowledge that the organisation has and to highlight those areas where its knowledge is limited or non-existent, so that decisions may be based on confirmed information rather that assumptions or guesswork. A Marketing Audit is a “self administered” method for identifying and realizing under-utilized marketing resources, comprising the analysis of :

the market,
the business,
the organizations own strengths and weaknesses ,
the economic environment,
he marketing environment and the competition.
the marketing strategy and the planning process,
the product/service range,
company performance (in terms of strengths weaknesses)
the market size and structure
the buying process
the competitive climate as well as many other areas where knowledge is essential or desirable for informed decision making. The most important questions that need to be asked are “How do you know? Where is the evidence?, Can it be verified?

Being responsible for producing the necessary profitable income for their business, commercial managers will be assessed on how much income they produce and how efficiently they manage and use their resources in its production

November 29, 2024 Posted in: business development, business efficiency, Business Marketing, business performance improvement, business performance indicators, business performance management, business performance measurement, marketing development, marketing management, marketing metrics, marketing performance measurement, marketing ROI, performance management, performance measurement indicators, Uncategorized Comments Closed

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