By: Anuj Khanna
What Customer Satisfaction and Marketing Systems to put in place to Improve Profits of your Growing Enterprise
There is an old saying that ‘If anything can go wrong, it will.’’ Therefore, it is important for every company, be it a Startup, Small /Medium business to put Marketing Controls in place to make sure that the current year is going to be more profitable than the previous year.
It is a well-known fact derived from research across companies over the years that most companies have inadequate control procedures. Key aspects of the lack of marketing control processes are:
- Small companies do a poorer job of setting clear objectives and establishing systems to evaluate the performance
- About 1/3 rd of companies have no regular review procedures for understanding problems from their products
- Almost half of companies fail to compare and analyze their 4Ps including pricing, warehousing or distribution cost
- The same number of companies fail to conduct a formal evaluation of advertising effectiveness or review sales force performance
There are four marketing controls that each company should put in place at least at the start of every year. These include Annual Plan, Profitability, Efficiency and Strategic controls. In this article, I am going to detail out the Annual Plan control. The purpose of this control is to examine achievements of the planned results for sales, profits and other goals. This starts with the basic step of setting the goals, then measuring the performance, diagnosing the performance and lastly taking corrective actions to improve the marketing performance.
The five tools one can use to check on marketing plan performance are:
As the name indicates, this measures and evaluates the actual sales against the goals. This is broken into Sales Variance analysis and Micro-sales analysis. Sales Variance analysis is used to measure the relative contribution of different factors, such as Price, Volume (No. of Software licenses sold etc.), to the gap in sales performance. Micro-sales analysis looks at specific factors like Products, Territory and so forth in order to understand the cause for the decrease in sales.
Market Share Analysis
While doing sales analysis, one of the missing factors is the company’s comparison to its competitors. The different types of market share are Overall market share (Comparing with overall target market), Served market (Considering the specific target market) share, Relative market (Taking into account the top 3 competitors) share, and Relative market (Comparing to the leading competitor) share.
Marketing Expense to Sales Analysis
This is an important ratio to calculate as part of the Marketing Control analysis. This includes five different ratios – Sales force to sales, Advertising to sales, Sales promotion to sales, Marketing research to sales and Sales administration to sales. The changes in these ratios need to be measured taking into account the fluctuations. The fluctuations can be tracked using a Control Chart Model which allows companies to measure the deviations between desired, upper and lower limits. When the Marketing expense to sales ratio is out of control, disaggregated data can be used to track the problem. An example of that is a graph which shows Quota Attainment (percentage) on x-axis and Expense Attainment (percent) on the y-axis in order to do a comparison and revenue deviation by region. This will show which region achieved its sales quota close to the expected expense levels and which region exceeded the quota with expenses being proportionately higher. This type of graph will also show the troubling regions which achieved less than 80% quota with disproportionately high expenses. These deviant regions can then be mapped with the associated sales representative to further analyze the reasons for the same.
In order to see how and where the company is making money, the Marketing Expense to Sales ratio needs to be analyzed in an overall Financial Framework. A company can use the below Financial Model for calculating the Return on Net worth.
Customer Satisfaction Tracking
The above measures of Financial Analysis, Marketing Expense to Sales Analysis and others are quantitative measures, which are important but not sufficient. Every company needs to have qualitative measures as well. These measures can provide them early warnings of market share erosion. Proactive companies need to set up systems to monitor satisfaction of not only their customers, but their dealers, and other market systems participants. Putting this monitoring in place will provide early signs regarding changes in customer satisfaction/preference in order to take appropriate actions to prevent the effects of these changes on company’s sales and profits.
The main Customer Satisfaction Tracking Systems are as follows:
Complaint and Suggestions System
In today’s customer experience era, a market-oriented company needs to record, analyze, and respond to oral and written complaints from their customers on their products and services. Research suggests that well-advised companies encourage, facilitate and even compensate for customer complaints. This is an important system for the Digital, fiercely competitive and commoditized era where every growing company is trying to provide the best customer experience ever. This could be seen as a starting point towards better customer retention because it will increase the consumer’s expected utility from the product.
In this system, companies create and run panels of customers which communicate their attitude on a regular basis. This feedback can be collected through a phone call or questionnaire. The information collected is important as it is more representative of the range of customer attitudes towards the company’s products and services. Creating this kind of panel also shows your customers that you are listening to them and are interested in what they have to say.
Customer surveys can be done in a formal manner by mean of a standardized yet locally sensitive questionnaire. This will help the company determine the needs and attitudes of customers. Once this data is compared with the financial data, expectation plus past attitude information, the company is able to determine its strengths and weaknesses plus their probable causes. The next step is to determine where and how effort should be applied to correct the weakness and preserve the strengths as per the results of the survey. This needs to be a continuous process which starts with the managers taking action and maintaining it in order to keep evolving in terms of the customer changes.
When the company performance deviates too much from the Marketing Plan and Goals, corrective action needs to be taken. Normally, the company needs to start with minor corrective actions and if they fail to work, more drastic measures need to be taken in order to reduce the deviation from the Marketing Plan and increase the overall performance.
On behalf of Dataquest, I wish all our readers the most the profitable year 2018.
(The author is a B-Tech from IIT BHU and MBA (Marketing) from California State University, Los Angeles is a Software Products and IT Services Marketing professional with work achievements in Startups, SME’s and MNC’s for 22+ years across all core areas of marketing)