I. Introduction: Marketing control systems are important elements in organizational learning.

The control process consists of measuring performance, comparing performance against a standard, and then examining performance to determine causes of variance, or deviation from the standard. Control occurs at both the macro, or system, level and the micro, or subsystem, level. Control processes also exist for inputs and outputs. Combining input and output analysis is useful for examining efficiency. The data used to evaluate performance vary from one observation to the next due to changes in the system, tinkering with the system, external causes, or random variance. Tools for controlling marketing performance include the standards used to compare with performance. Types of standards include budgets and quotas, benchmarks, and pricing plans. Measurement tools include marketing audits, customer satisfaction measurement, and different types of accounting systems, such as cost accounting and activity based costing. II. Revenue: To Measure ROI, Use Gross Profit Some managers use sales revenue to measure ROI. But it is much preferable to use gross profit (also called gross margin). Why? Because if you use gross profit, you will be speaking the conservative language of your CEO and CFO. Here is a detailed example: Let's say you have invested ` 100,000 in a campaign and you have identified ` 500,000 in incremental sales that resulted from that campaign. You can prove it from the leads you have tracked. That's good. But if you calculate (` 500,000 - ` 100,000) / ` 100,000 = 4 (an ROI of 400%), you will be overstating your ROI. You are ignoring the cost of goods sold (COGS), also called "cost of sales." As the accounting world sees it, your company's incremental gain from those sales is this:
Revenue - COGS = Gross Profit

So, to talk the language of your CEO and CFO, you need to know the gross margins on the kinds of items sold (which you can probably get from Sales or Accounting). Then, you can make a calculation like this: Sales revenue (` 500,000) minus COGS (` 200,000) equals gross profit (` 300,000). Gross Profit minus the Cost of Your Campaign, all divided by the Cost of Your Campaign, equals ROI. (` 300,000 - `100,000) / `100,000 = 2 The ROI is 200 percent. So, whenever you measure ROI, inquire into the COGS. In exceptional cases, such as the sales of services that have no direct costs, you won't have to figure in any cost. Be guided by what Accounting says.

Marketing Control Systems (Session I)

V. Nilakantan

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III. Measuring the ROI of Your Event Choosing clear objectives What are some of the objectives that make sense for marketing personnel? They range from generating sales leads, to strengthening bonds with customers, to building community relations. For business marketers, event objectives typically fall into one or more of these categories: Achieve an ROI Build awareness Close sales, sign contracts or generate RFPs Conduct market research Enter a new market Gather new prospects for the database Generate qualified sales leads Influence the press or financial community Introduce a new product Recruit, educate, or motivate distribution partners Recruit, educate, or motivate new employees Retain current customers, penetrate current accounts Support your industry or community Set only one primary and no more than two secondary objectives. This will keep your efforts focused, and avoid dilution. It will also allow you to line up every strategy, every tactic, under the objectives themselves. When considering various activities surrounding the event, you can ask yourself the question: "Does this support our mission?" If the answer is no, dont do it.

Make your primary and secondary objectives as specific as possible. Then, attach a metric to each objective. Primary Objective Associated Metrics Associated Metrics
Introduce new product Number of demos given Number of attendees Number of samples ordered Number of press mentions Number of qualified leads generated by product Number of RFPs requested Number of qualified leads Cost per qualified lead Number of prospects gathered Cost per new prospect contact Number of new accounts added to the database Number of prospects gathered by industry Number of qualified leads generated by industry Number of RFPs requested Revenue Number of transactions closed Number of purchase orders signed Expense to revenue ratio (E:R) Return on investment ratio (ROI) Number of new accounts/customers Number of attendees Pre-post event awareness levels Number of press mentions Number of partners recruited Cost per recruited partner

Generate sales leads Gather new prospects

Enter new market

Sales

Awareness

Recruit channel partners

Identify the method you will use to capture the data specified by the metrics. Here are some examples:

Marketing Control Systems (Session I)

V. Nilakantan

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Primary Objective
Introduce new product Gather new prospects

Associated Metric
Number of demos given Number of leads generated by product Number of prospects gathered Number of new accounts added to the database Revenue Pre-post event awareness levels Number of press mentions Return on investment ratio Number of customer appointments

Measurement Tools
Self-reporting by event staff Lead volume by product Attendee RSVPs and registrations

Sales Awareness ROI Retain current customers

Sales lead management system Pre-post event survey of attendees Press coverage analysis Did-you-buy survey ROI calculator Reporting by event staff and salespeople

IV. SALES REVENUE MANAGEMENT Sales Revenue management is primarily focused on ensuring that the sales machinery is fully lubricated and functioning at maximum rate given its design. Key Revenue Management Business Questions

How much is the sales revenue generated by which channel and product? How much is the leakage between lead generation to interest of purchase by Customer to final purchase? Given the past trends, what are the projected sales numbers? How the sales numbers stacking up to the competition performance? What has been the sales trend, over last 12 months OR period to period comparison? How much is my sales pipelines and what sales numbers it will lead to? What is the sales case size patterns? How much time it takes to close a sale from the start point?

Sales revenue management business drivers

Sales force Density (Sales Lingo- 'Number of Feet per street') Geographical spread ('Number of streets') Sales force Productivity ('Number of sales achieved per pair of feet') Sales velocity ('Time Taken between the first contact and sales closure') Sales Strike Rate ('Ratio between initial contacts made to final sales') Sales Pipeline (In-progress sales) Consistency and Predictability of sales performance

SALES REVENUE SWOT Following are the components of a typical SWOT for Sales revenue management function. The list is divided into two parts Strengths and Weaknesses (internal) and Threats and Opportunities (External).
i. ii. iii. iv. v. vi. vii. viii. Geographical Footprint Tenure and dedication of sales force Size of sales force feet on the street Scalability of sales force Strong sales leadership depth High Sales Predictability Smooth sales curve Healthy Sales Pipeline

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V. Nilakantan

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ix. x. i. ii. iii. iv.

High sales strike rate Robust sales reporting system Emerging vs. Matured markets Rising vs. stagnating disposable income of a target segment Price in-elasticity vs. highly price sensitive market First Mover Advantage vs. Crowded Market

Opportunities <> Threats

V. Sales and Cost Analysis Control is among the most critical functions performed by sales managers as it measures the performance of the system and helps take corrective action if the performance of the system is not in agreement with the formulated plans. The present day dynamic marketplace has forced sales managers to shift their focus in sales control from sales volume alone and to lay equal emphasis on costs incurred in implementing the sales effort. The objective of sales control is to ensure that the sales efforts are in tune with its sales plan by taking necessary measures in case of deviations. The sales control function measures the performance of the sales force and identifies the problems and opportunities that the firm is exposed to. The process of sales control involves setting goals, comparing actuals with the targets, and taking up corrective action if necessary. The sales efforts of a company can be studied through a sales analysis that involves gathering, classifying, comparing, and studying the sales data of the company. A typical sales analysis involves deciding on the purpose of evaluation, comparing the sales figures with some standards and processing the data to generate reports. A sales analysis can be most informative when the sales data is broken down hierarchically. An analysis of volume of sales by categories is very helpful in identifying the root causes of the problems in the sales activities of the firm. Though a sales analysis helps identify the problems associated with the sales activities of the firm, it is also bound by a few limitations like dependency on accounting records, inability to reflect the profitability of sales, etc. Sales analysis involves analyzing sales volume or total sales of the company. It includes the total sales of the company by territory, customer, and product category. A sales audit is periodically taken up by the sales management to examine the entire selling operations of the firm. The audit involves an audit of the sales organization, the sales environment, planning systems, and sales management functions. While a sales analysis measures the sales volume achieved, the marketing cost analysis looks into the costs and expenses incurred to achieve the sales volume and their justification. A cost analysis involves spreading the natural costs, allocating them to functional units, studying profitability of the units, and implementing appropriate action depending on the findings of the analysis. Just as a sales audit examines the entire sales operations of a firm, a marketing audit evaluates and enhances the effectiveness of a firm's marketing operations by studying its marketing strategies, policies, and practices. Sales managers use profitability analysis to relate the sales revenues to marketing costs. This helps sales managers to take necessary measures to ensure higher profitability of the firm's sales transactions. Products Geography Demography Customers Channel

Marketing Control Systems (Session I)

V. Nilakantan

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