Marketing management needs performance measurement
How effectively business assets are managed may often be the difference between profit and loss. For the commercial manager with the responsibility of producing profitable income for the long term future of the business, being able to manage the customer related assets efficiently and effectively to anticipate and satisfy customer demand is essential .
There is no magic formula for managing the use of customer related assets in a business, but it was the world famous management consultant, the late Peter Drucker who said “ you can’t manage it if you can’t measure it”. Thus using performance measurements across all the customer related activities would seem to be the basis for their effective management.
Measuring performance other than sales levels has never been a strong point with those involved with marketing. Terms such as metrics, benchmarks and measurements are frequently used interchangeably as if they were the same, when they are quite different in meaning. However, the sensible and forensic use of performance measurements, not only enables a commercial manager to see and analyse how efficiently and effectively customer satisfaction is being achieved, and to produce business plans based on sound information.
When it comes to verifying their contribution to the business and justifying the investment, Commercial Managers must look at their contribution to the whole of the business getting and retaining activities and not consider their functions and contribution in isolation. Reporting on business performance must therefore be across the all the activities involved in getting and retaining customers and their profitable revenue. Commercial managers must include all areas of the business that directly relate to anticipating and satisfying customer demand, even if they have no direct management responsibility for them, which may for example include production and credit control.
The only measurements which have true value are those which are quantifiable which are usually of inputs and output; such as costs, investments and revenue. In order to achieve these, Commercial Managers need to list all the activities that provide direct and indirect support to sales and customer satisfaction as well as quantify separately all the costs involved in providing both direct and indirect support
Commercial Managers must provide a detailed analysis of the contribution that all the various business areas collectively make to the gaining and retaining of business. This should include an analysis of all sales made by: product, customer group, customer market, market sector, market segment, geographical area. In addition it should identify the source of sales including web produced, direct sales, agents, etc.
The overall cost of sales must be carefully analysed. This analysis should include all costs relating to product, customer group, customer market, market sector, market segment, geographical area. It should identify the cost of sales by direct sales, agents, and web page.
Commercial managers should be able to report regularly on the general performance of business getting activities in terms of:
- Orders: number, average value, total value - to establish the productivity of the sales organisation.
- Enquiry/quotation conversion rate –- to indicate the level of customer acceptance of the sales price with the sales proposition.
- Quotation/order conversion rate - to establish the level of customer satisfaction with the sales proposition.
- Analysis of lost orders – why lost – is there a trend?
- Levels of product return – does this indicate a problem in quality control.
- Order/delivery time – how long does it take, is it too long?
- Invoice to payment time – how much time is given for payment?
- Total marketing cost per order – what are the total costs involved in getting and completing an order?
- Operating Profit – what is it and how is it calculated?
- Net Profit/unit sale – are all sales profitable? If not why not?
- Debtors/sales- how much or the expected income is unpaid debt?
- Stock Turn – how many times is the stock turned annually?
- Growth in Customers – what is the annual growth/ shrinkage of the customer base?
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 marketer 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.