MARKETING STRATEGY O C FERRELL MICHAEL D HARTLINE

MARKETING STRATEGY O. C. FERRELL • MICHAEL D. HARTLINE APPENDIX 11 Assessing the Financial Impact of the Marketing Plan

The Financial Assessment Process • Budgetary considerations play a role in the identification, evaluation, and control of alternative marketing strategies. • Top executives must be convinced that the marketing plan and strategy are a good value for the firm. • The ratio of the plan’s costs compared to expected returns will be a deciding factor in determining which plans receive approval and funding. • Performing a financial assessment of the marketing plan requires a working understanding of both finance and statistical analysis. 2

Financial Assessment Tools (1 of 2) • Contribution Analysis – Attempts to determine the amount of output (revenues) that can be expected from a given set of inputs. – The formula for contribution analysis: • Response Analysis – Addresses the question of incremental change. The goal is to estimate accurate response coefficients that can be used to predict the change in sales volume based on a change in one or more elements of the marketing mix. 3

Sales Response to Advertising Expenditures Exhibit 11 A. 1 4

Financial Assessment Tools (2 of 2) • Systematic Planning Models – Marketing managers often use a planning model to estimate the financial effects of marketing activities proposed in the marketing plan. – The inclusion of a detailed planning model in the marketing plan can assist the marketing manager in convincing top executives that the implications of the proposed marketing plan have been considered carefully. 5

Exhibit 11 A. 2 6

Exhibit 11 A. 3 7