978-0130387752 Chapter 2 Marketing Performance Tools and Application Exercises

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Marketing Performance Tools and Application Exercises

2.1 Company-Level Net Marketing Contribution: Figure 2-15 is used with this marketing performance tool to

address analysis items A (next page) and B (page 19). The starting data are shown here to make

comparisons with the analysis items easy.

A. Evaluate the profit impact of eliminating the casual shorts and knitted sweaters product lines.

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B. What would be the profit impact of increasing market share from 2 to 3 percent for the casual shorts

product line if marketing and sales expenses were doubled ($1.5 million to $3 million)?

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2.2 Market-Level NMC, Marketing ROS, and Marketing ROI:Figure 2-18 is used with this marketing

performance tool to address analysis items A (next page) and B (page 22). The starting data

are shown here to make comparisons with the analysis items easy.

A. Evaluate the profit impact of exiting the fashion segment.

Teaching Note:This would be a disastrous decision. Despite a low pretax net profit of $300,000, the

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B. In the fashion segment, how much market share would the business have to obtain to keep the same

level of marketing profits if the business doubled marketing and sales expenses in that segment?

Teaching Note:The current market share of 3.5 percent would have to increase to 5.2 percent to

maintain a net marketing contribution of $6.8 million when the marketing and sales budget is doubled to

2.3 Company Net Marketing Contribution and Marketing ROI: Figure 2-13 is used with this marketing

performance tool to address items A and B (below) and C (next page).

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A. For a company of interest, obtain the required input from a company annual report. Evaluate the

company’s marketing profitability and how it contributes to net profit before taxes.

Teaching Note:If students obtain their company data off the Internet, they will probably have to use

B. How would marketing profits and net profit change if sales increased by 25 percent?

Teaching Note:For the data presented above, when sales are increased 25 percent with no other

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C. Evaluate the profit impact of a strategy in which the percent margin is increased by 5 points and

marketing and sales expenses are increased by 2 percentage points.

Teaching Note: As shown, this strategy produces an increase of $3.375 million in the net marketing

contribution. An additional assignment would be to instruct students to find the level of percent margin

2.4 Benchmarking Marketing ROI versus Operating Income as a Percentage of Sales: Figure 2-23 is

used with this marketing performance tool to create the data needed to address items A (below) and B

(next page).

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Ford

Performance Metric Average Median

Markeng ROI 163% 135%

Operang Income (%) 10.4% 11.1%

A. For a company of interest, go online and obtain the operating income and the data needed to

estimatethe company’s marketing ROI. You will probably need to use 75 percent of SGA expenses as

your estimate of marketing and sales expenses, because companies rarely report marketing and sales

expenses separately in their financial statements.

Teaching Note: I recommend using the following keywords to search for a company income statement:

B. Next, collect the same data for a major competitor. How does the first company compare with this

competitor in terms of the marketing profitability metrics (marketing ROS and marketing ROI) and

operating income as a percentage of sales? How would these results compare with the average

performance shown in Figure 2-24?

Teaching Note: For the GM’s benchmark competitor, we used Ford’s 2011 Income Statement. The

profile in the chart on quest A (previous page) shows important differences in performance. While GM

With respect to Figure 2-24, the

marketing ROIs for General Motors

A very good exercise for students

would be for them to do the same

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