Marketing Control: Top 4 Methods of Marketing

Control
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On the basis of types of criteria – sales, profits, efficiency, and strategic considerations – used for

measuring and comparing results, there are four types or tools of marketing control. In every type of

control, the same procedure is applied, i.e., setting standards, measuring actual performance, comparing

actual performance with standards, and taking corrective active actions, if required.

Philip Kotler considers four types of marketing control:

1. Annual Plan control

2. Profitability control

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3. Efficiency Control

4. Strategic Control

Annual Plan Control:

In this method, annul plans are prepared for various activities. Each plan includes setting objectives

(expected results or standards), allocating resources, defining time limit, and formulating rules, policies

and procedures. Annual plan control relates to sales. Periodically (mostly annually) the actual results are

measured and compared with standards to judge whether annual plans are being (or have been)

achieved.
Depending on the degree of difference between the planned and the actual results, causes are detected

and suitable corrective actions are undertaken. Thus, it contains checking ongoing performance against

annual plan and taking corrective action. Figure 1 shows five measures of annual plan control.

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Measures (Evaluation Tools) of Annual Plan Control:

Following five measures are used in annual plan control:

1. Analysis of Different Sales:

Analysis of different sales contains measuring and evaluating different sales (total sales, territory- wise

sales, distribution channel-wise, product-wise sales, customer-wise sales, etc.) with annual sales goals.

Targets are set for different types of sales and actual sales of different categories are compared to find

out how far company can achieve its sales goals.

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2. Analysis of Market Share:

proportion of company’s sales in the total sales of the industry. It helps to know how well the company is

performing relative to its close competitors. Thus, the performance is assessed against expected market

share and competitors’ market share.

It involves considering three types of market shares:

i. Overall market share

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ii. Served market share

iii. Relative market share

3. Analysis of Market Expenses-to-Sales:

This type of control checks marketing expenses. It ensures that the firm is not overspending to achieve its

annual sales goals. Different marketing expenses are watched in relations to sales.

Normally, company considers five components to calculate expenses-to-sales ratios and

compares them with standard ratios to find out how far expenses are under control, such as:

i. Sales force-to-sales ratio

ii. Advertising-to- sales ratio

iii. Sales promotion-to-sales ratio

iv. Marketing research-to-sales ratio

v. Sales administration-to-sales ratio

permissible limits, it should be taken as a serious concern and needed steps are taken to keep them

under control.

4. Financial Analysis:

Financial control consists of evaluating sales and sales-to-expense ratios in relation to overall financial

framework. It means net profits, net sales, assets, and expenses are studied to find out rate return on

total assets, and rate of return on net worth.

Financial analysis determines firm’s capacity of earnings, profits, or income. Attempts are made to find

out factors influencing firm’s rate of return on net worth. Here, various ratios are calculated such as profit

margin ratio (net profits + net sales), asset turnover ratio (net sales + total assets), and return on assets

ratio (net profits + total assets), financial leverage (total assets + net worth) and return on net worth (net

profits – net worth). Profit margin can be improved either by cutting expenses and/or increasing sales.

5. Analysis of Customer and Stakeholder Attitudes:

The measures of annual plan control discussed in former part are financial and quantitative in nature.

Qualitative measures are more critical because they give early warning about what is going to happen on

sales as well as profits.

Manager can initiate precautionary actions to minimize adverse impacts of forces on the future outcomes.

Under this tool, customers’ attitudes are tracked to project the way they will react to the company’s offers.

Alert company prefers to set up a system to monitor attitudes of customers, dealers, and other

participants.

Base on their attitudes, preference and satisfaction, management can take early actions. This tool is

preventive in nature as adverse impact on the future results can be prevented by advanced steps.

Market- based preference scorecard analysis is used to measure (score) attitudes of customers and other

participants. Such analysis reflects actual company’s performance and provides early warnings.
Measuring Customers’ Attitudes:

Here, a firm tries to measure attitudes of customers by using various methods like, complaints and

suggestions, customer panels, customer survey, etc. It provides details about new customers created,

existing customers lost, dissatisfied customers, relative product quality, relative service quality, target

market awareness, target market preference, and other valuable information.

Measuring Stakeholders’ Attitudes:

It consists of measuring or recording stakeholders’ attitudes. It shows the pattern of stakeholders’

preference, attitudes, and overall response toward company and its offers. Stakeholders include

suppliers, dealers, employees, stockholders, service providers, etc. They have critical interest and impact

on company’s performance.

Without their cooperation and contribution, a company cannot realize its goals. When one or more of

these stakeholders register dissatisfaction, management must take suitable actions. Methods used to

track attitudes of customers can also be used for measuring attitudes of stakeholders.

Profitability Control:

In this method, the base of exercising control over marketing activities is the profitability. Certain

profitability (and expenses) related standards are set and compared with actual profitability results to find

out how far company is achieving profits. Profitability control calls for measuring profitability of various

products, channels, territories, customer groups, order size, etc. It provides necessary information to

management to determine whether products, channels, or territories should be expanded, reduced, or

eliminated.

Process of Marketing-Profitability Analysis:

Systematic and logical process is used for analysis of profitability.

It involves:

1. Identifying Functional Expenses:

advertising, selling and distribution, packing and delivery, billing and collection, etc.

2. Assigning Function Expenses to Marketing Entities:

Simply, expenses of particular head (for example, salary or advertising) are associated with different

entities like products, channels, territories or customers groups.

3. Preparing Profits and Loss statement:

A profit and loss statement is prepared for each type of products, channels, territories, etc., to evaluate

their relative performance. Based on relative performance in form of profitability, management can decide

on products, channels or territories to be expanded, reduced or eliminated.

For example, a firm has five products, like A, B, C, D, and E. If profit and loss statement shows

that:

(1) Product C is more profitable, and therefore, it must be expanded;

(2) Product B is poor, and, therefore, it must be reduced;

(3) Product D is making loss, and therefore, it must be eliminated, and

(4) Product A and product E are satisfactory, and therefore they must be maintained. In the same way, it

can be applied to different territories and segments.

Table 1 shows how to prepare profit and loss statement for different products.

4. Taking Action:

On the basis of the profit and loss statement, necessary actions can be directed.

Actions include one or more of followings:

i. Expanding product(s)
ii. Reducing product(s)

iii. Eliminating product(s)

iv. Reducing any of the expenses

v. Increasing sales, etc.

Efficiency Control:

This control, particularly, concerns with measuring spending efficiency. While profitability control reveals

the relative (in relation to different entities like products, territories, channels, etc.) profits a company is
earning, the efficiency control shows the ways to improve efficiency of various marketing entities like

sales force, advertising, distribution, sales promotion, and so forth.

Sometimes, a post of marketing controller is created to work out a detailed programme to measure and

improve efficiency of expense-centered marketing activities. Here also, in order to evaluate efficiency

level of different marketing activities, the efficiency standards (of ideal performance) are set and are

compared with actual performance.

Efficiency control can improve efficiency of marketing department in two ways – one is, improving ability

of various marketing activities to contribute more in reaching the goals, and the second is, reducing

expenses or wastage.

Types of Efficiency Control:

Figure 2 shows major types of efficiency control. Main types of efficiency control involve controlling sales

force efficiency, advertising efficiency, sales promotion efficiency, distribution efficiency, and marketing

research efficiency.

1. Sales Force Efficiency Control:

has to make a lot of calculations and paperwork.

Common criteria used to measure and evaluate the sales force efficiency include:

i. Average number of sales calls per salesman in a day

ii. Average sales calls time spared per contact

iii. Average revenue generated per call

iv. Average costs incurred per call

v. Entertainment cost per calls

vi. Percentage of orders per specific number of calls, i.e., how many orders have been received from 100

calls made

vii. Number of new customers created during specific period

viii. Number of customers lost in a given period

ix. Contribution of salesmen in total sales, revenue, and profits

x. Sales force costs as percentage of total sales.

Questionnaire, discussion, inspection, observation, salesman’s report, etc., methods are used for the

purpose. However, most companies use salesman’s report. A unique computer-based programme or

software can also be developed for speedy and accurate measurement of sales forces efficiency on a

regular basis. Simply, actual performance of sales force is compared with these criteria to find out

deviation, and, accordingly, necessary actions are taken.