Market-Based Management

What typifies successful businesses?

Success/Profitability Drivers
1. Market attractiveness

2. Competitive advantage
3. Market orientation

Marketing Orientation Requires

Market-based organizational structure

Market-oriented employees
Market-oriented culture Market-based management systems

A Market-Based Management System...

Tracks and communicates both internal and external market performance metrics. Measures market-level profitability.

External Performance Metrics

Indicators of future revenues and profits

Customer awareness Customer interest Rate of product trial Degree of customer satisfaction/dissatisfaction Customer perceptions of quality and value Market share Customer retention Revenue per customer

Internal Performance Metrics

Sales ROI Net profits

Market-Level Profitability

How do marketing expenses impact a firms profitability?

Net Marketing Contribution (NMC)= Market x Market x Price/ -Variable Cost/ - Marketing Demand Share Unit Unit Expenses

Impact of NMC on net profit.

Net Profit=

Operating Overhead NMC Expenses Expenses

Breakdown of NMC Formula

Market x Market x (Price/unit - VC/unit) - Mkt Expenses Demand Share

Mkt Demand (in units) x Mkt Share = Sales volume in units Sales vol. in units x Price/unit = Sales volume in dollars Price/unit - VC/unit = Contribution margin (CM) Price/unit x %margin = Contribution margin/unit Price/unit - contribution margin/unit = Variable cost/unit

Impact of NMC on Marketing Strategy...

Market x Market x Price/ -Variable Cost/ - Marketing Demand Share Unit Unit Expenses