Amy has a master's degree in secondary education and has taught math at a public charter high school.
Companies know that how well they do in sales is largely due to how well their marketing management team does its job. A company's marketing management is a single person or team responsible for the marketing of a company's products. A good marketing management team knows what it takes to get people to buy. It also knows what kinds of products should be introduced to the marketplace, when to drop a particular product that isn't selling, and how much to charge for each product.
How does a marketing management group know all of this? It performs market research to find out what kinds of products potential customers want. It also creates marketing materials to reach potential customers to encourage them to buy, such as commercials on television and ads in magazines. The marketing management team may also plan promotional campaigns, like coupons and periodic sales. Product packaging and the company's websites are also created and designed by marketing management. All of this is performed within the marketing budget of the company. Marketing management knows exactly what to do because they are following the marketing plan they have created.
The Marketing Plan
What is a marketing plan?
A marketing plan is the written plan outlining how products are to be promoted. The marketing plan is a very detailed document that includes how products will be marketed, the marketing budget, how this budget is to be used for the various forms of marketing of the products, and specific dates for various campaigns, such as perhaps a spring and fall sale. For large companies, this can mean hundreds of pages, while smaller companies may have a plan that's just a few pages. This marketing plan is usually written for the next year, which means that a new marketing plan needs to be written each year. It also includes how marketing management will measure the success of each marketing campaign. This success measurement tells the marketing management team whether to continue the campaign, make edits to it, or stop it altogether.
Recording the Results
Part of measuring the success of each marketing campaign is data collection, or recording the results of each campaign. This is also spelled out in the marketing plan. This usually involves comparing the cost of implementing the marketing campaign to the resulting sales from the campaign. How does marketing management keep track of which campaign led to which sale? This is also spelled out in the marketing plan. Marketing management can use things like specific coupon codes or, for online sales, special links to sales websites.
The Return on Investment
This comparison of campaign cost to campaign sales is referred to as the return on investment or ROI. This is a calculation that a marketing management team will perform numerous times. For example, say a particular television commercial costs $10,000 to implement. This television commercial asks viewers to call a special number to get a great deal on the company's product. It's a special buy one, get one free deal. After running the campaign for a month, the company collects its data and finds that this television commercial resulted in people calling in $50,000 worth of orders via the special number. As a side benefit, the company saw an increase of $12,000 in sales at its retail location from people viewing the commercial and being curious about the store. What is the ROI of this campaign? Marketing management will take the total sales minus the cost of the marketing campaign and then divide it by the cost of the marketing campaign. The math looks like this for our scenario:
ROI = (($50,000 + $12,000) - ($10,000)) / $10,000
The sales that resulted directly from people calling the special number from the commercial is added to the increase in sales at the retail location resulting from people viewing the commercial. The cost of the television commercial is then subtracted. The result so far is $52,000. Dividing this by $10,000 gives a ROI of 5.2. Changing this to a percentage gives 520 percent. So this television campaign resulted in a ROI of 520 percent. That's not bad. The marketing management team decides to keep this television commercial and run it again in the future because the marketing plan states that campaigns that result in a ROI of 200 percent or more should be kept.
Let's review what we've learned. A company's marketing management is a single person or team responsible for the marketing of a company's products. The marketing management is responsible for creating and implementing the marketing campaigns used to promote the company's products. It is also responsible for tracking the resulting sales to determine whether the campaign is profitable or not.
A marketing plan is the written plan outlining how products are to be promoted. It is a very detailed document that spells out the marketing plan for the year. It shows exactly what kinds of marketing campaigns will be performed and when. The marketing plan also includes directions for measuring the success of marketing campaigns, along with rules for deciding whether a particular campaign is successful or not.
Measuring a marketing campaign's success involves comparing the campaign cost to the resulting sales from the campaign. This comparison of campaign cost to campaign sales is referred to as the return on investment, or ROI. To calculate the ROI, the campaign cost is subtracted from the resulting sales and then divided by the campaign cost. This number is then changed to a percentage. The marketing plan will also specify at which ROI campaigns will be deemed successful.
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