By Ed Pierce, Fleet Industry Marketer
Despite the booming economy, smart companies continue to manage expenses, particularly selling, general and administrative (SGA) expenses. According to financial consulting firm Sageworks, average overhead for scientific and technical services companies – including companies in the fleet services industry – represent over 50 percent of sales.
These are expenses that cannot be assigned to the cost of providing a specific service. A large portion of these expenses fall into the marketing bucket, such as direct sales, product development, distribution, advertising, sales promotion, public relations, and customer service.
Deeper Expense Evaluation
Expenses related to marketing continue to undergo careful evaluation. Inefficiencies discovered are being addressed. Reflecting such strategies, tactical goal metrics are more specific providing actionable results. Unproven promotion programs are being piloted to determine efficacy. And cross-subsidization of marketing-related expenses for accounts are spent more judiciously to prevent a few highly profitable accounts from hiding inefficiencies inherent in less profitable accounts.
The Productivity Conundrum
While addressing marketing-related inefficiencies has been the natural starting point, improving the productivity (effectiveness) of marketing expenditures offers even more promising potential benefits. However, quantifying effectiveness continues to be difficult because of the intangible role of marketing, which function as an adjacency to goods and services, rather than the production of goods and services themselves.
An Example: The Promotion Problem
Looking at the measurement of a promotional project – as described by John A. Weber, Mendoza College of Business, University of Notre Dame – is instructive:
“A campaign would begin by recognizing campaign objectives, for example, to establish awareness, to build an image or to close a sale, etc. Multiple objectives are reasonable, reflecting different stages of a campaign. Of course, multiple objectives create measurement difficulties right from the start. The overall productivity measure would then be expanded to capture the marketing context (low or high involvement) and the appropriate model of customer behavior.
“One would also have to carefully identify the present value of incremental investment flows required by the campaign and consider how long the results of the promotion should be measured—clouding the issue of the appropriate timeframe for the financial analysis.
“Given all these complexities, not surprisingly, there is little consensus on what should be included and measured. All of these issues taken together make estimating the productivity of a promotional effort in financial terms a daunting task indeed.”
Next month, we’ll consider some possible steps to develop better measures of marketing productivity.
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