Strategic Marketing Management
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Chapter 5 : Marketing Costs and Financial Analysis
Analysing Marketing Costs
Marketing Costs
Importance of Analyzing Marketing Costs
Types of Costs
Steps Involved In Marketing Cost Analysis
Challenges In Marketing Cost Analysis
Measuring Marketing Productivity
Customer Profitability Analysis
Process of Customer Profitability Analysis
Financial Situation Analysis
Key Financial Ratios
Contribution Analysis
Financial Analysis Model
Productivity
Chapter Summary
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An organization must utilize its resources optimally and keep track of where
and how the resources are being spent on marketing activities. Marketing
costs are the costs incurred on the company's efforts to attract and retain
customers. Marketing cost analysis is the identification of costs incurred
while marketing and distributing a product. The marketing cost analysis
helps the managers in effective decision-making, formulation of marketing
strategy, and planning and controlling marketing activities. Marketing cost
analysis helps the managers to identify customers who are profitable and
those who are unprofitable.
There are three types of costs that are important in the marketing cost
analysis process – fixed, variable, and semi-variable costs. Marketing
productivity is the measurement of the desirable output for a given amount
of input. Marketing productivity can be measured by the effective efficiency
method. The effective efficiency method uses two important factors of
acquiring and retaining customers. |
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Customer Profitability Analysis (CPA) involves the analysis of revenues
earned from the customers. This analysis helps managers to identify how the
profits are being generated, what the profitable segments are, who the
profitable customers are, and so on. The financial ratios can be used to
measure the performance of a company. Some of the key financial ratios that
help to analyze the health of a company are the profitability ratios,
liquidity ratios, leverage ratios, and activity ratios. Contribution
analysis helps a manager to analyze revenues and expenditures. This analysis
helps the management to identify how each of the activities or functional
units contribute to the profits of the company. Financial health can be
analyzed using the financial analysis model.
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Short Case Studies / Caselets