Presented by Group 3

1. Del I. Hawkins, Roger J. Best • University of Oregon • Charles M. Lillis US West Inc PresentedbyGroup 3 The Nature and Measurement Of Marketing Productivity in Consumer Durables Industries: A Firm Level Analysis

2. Authors’ Background * Ph.D., University of Texas at Austin * Professor of Marketing and Director of the Museum of Art at the University of Oregon * He has written a number of business cases and has numerous articles in the Journal of Marketing * His article on marketing productivity was voted Outstanding Article of 1987 by the Academy of Marketing Science Del I. Hawkins

3. Roger J. Best * Ph.D., University of Oregon * Working with a variety of companies in both marketing consulting and management education * He has written a number of articles that related to Marketing * He has developed the Marketing Excellence Survey, an assessment tool for measuring an individual's marketing knowledge and market orientation

4. Charles M. Lillis * Ph.D., University of Oregon *Former Dean of the College of Business at the University of Colorado * He has written many articles published in academic journals * Co-founder and principal of LoneTree Capital Management LLC * served as Director and Executive in various companies

5. Introduction • Improving productivity is a major concern in American industry • Effort to enhance marketing productivity have been hampered • Lack of clear concept • Absence of standard with which to compare a firm’s performances and costs • Basic question remains : how to measure productivity of the marketing team or of marketing decisions

6. Purpose of the Article Develop a managerially relevant concept of Marketing Productivity Operational Measurement Environmental benmarks to compare the marketing productivity of various businesses

7. Productivity: Can be discussed in either macro term or micro term A ratio of output from some activity to the input required by that activity The Nature of Marketing Productivity Marketing productivity= Marketing output/ marketing input

8. Marketing Output Marketing output= ( Relative Market Share) x ( Relative price) Relative market share : • Firm’s sale / The main competitors’ sale • Indicate a firm’s relative position in an industry • Provide one measure of a brand’s standing against competition which reflects the performance of the firm’s marketing effort • Dollar sales of being immune from effects of inflation over time • Either dollar or unit sales of being unaffected by overall market growth or decline

9. Relative price • A firm’s price level stated in relation to its major competitors • All other things equal, a manager would prefer a high relative price to a low one • Immune to fluctuations in the inflation rate • Unaffected by industry wide price shifts through the product life cycle • Can be compared across markets and industries

10. Marketing output= ( Relative Market Share) x ( Relativeprice) • Assumption: From the individual firm’s standpoint, the marketing function is asked to deliver both relative market share and relative price • The most desirable situation: large relative market share and high relative price • The task facing most marketing departments: maintain or grow relative share without sacrificing relative price

11. MARKETING INPUT Marketing cost • Increase in raw material cost  Improve the quality of an existing product line a marketing cost? Absolute dollars amounts • Marketing output purchased with $1 of market input • Effects of economies of scale A percentage of sales (Relative to Sales) • Purchased with 1 percent of sales • Inflation and functioning over time

12. MARKETING PRODUCTIVITY MPS = Relative Market Share x Relative Price Marketing Expenditures/Sales • “The marketing position that a firm obtainsfrom a given allocation of its resources” • Impact of marketing expenditures • Time period problem • Lags • Carry-over • Cumulative effects

13. DEVELOPMENT OF A MARKETING PRODUCTIVITY INDEX Explicit consideration of uncontrollable external variables. • Predict average firm’s Marketing Productivity Score given specified operating environment • The predicted score referred to as the marketing productivity index (MPI).

14. Data Base • The Profit Impact of Market Strategy (PIMS) data base • Data come from annual self report questionnaires • Not all variables would be optimal for this study • Impossible to work with absolute dollar • Only data base existence

15. Variables Influencing Marketing Productivity Positive variables: • Relative Product Breadth (RPB) • Relative Product Quality (RPQ) • Relative Customer Size Range (RCSR) • Served Market Growth (SMG) • Purchase Amount Immediate Customers (PAIC) • Customization (C)

16. Variables Influencing Marketing Productivity Negative variables: • Number of Competitors (NC) • Number of Immediate Customers (NIC) • Important of Auxiliary Service to End Users (IASE) • Frequency of Product Changes (FPC)

17. MODEL CONSTRUCTION • Correlation Matrix for the 135 consumer durable manufacturing firms

18. Model Evaluation • R2 & n values • Multiple Regression • Content or Face Validity • Nondurables

19. Implications 1. The role of Marketing Department towards productivity 2. Marketing Environment 3. Misleading comparisons of productivity

20. 1. The role of Marketing Department towards productivity * Delivering relative share and relative price at specified levels * Minimizing expenditures

21. 2. Marketing Environment * Communications and strategy * Market comparisons of productivity * Productivity score

22. 3. Misleading comparisons of productivity * Specific variables * Adjustments

23. Question ? Thank You