conceptualizing the marketing process as a machine converting marketing effort into marketing goals...
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Conceptualizing The Marketing Process as a Machine Converting Marketing
Effort into Marketing Goals and Outcomes
Ted Mitchell
Almost everything
• Can be conceptualized as a machine• Machines can characterized as having three
constituent parts• 1)Inputs, 2) Outputs, and 3) Conversion rates
A Basic Machine
The Machine’s Conversion
Process
InputInput
Input
Input
Many Outputs from The Marketing Machine
I am the manager
of this machine
OutputsOutputs
Outputs Outputs
Humans are machines
• Needing the inputs of food, water, and air, • Converting them• Into the outputs to move about and find more
inputs• the conversion process is called metabolism
measured in calories per day
Tree Leaves are machines
• Inputs: carbon dioxide, light and water• Output: Oxygen• Conversion called Photosynthesis measured as
the percent of light energy converted into chemical energy
Cars are Transportation Machines
• Inputs: gasoline, driving time• Outputs: miles of distance covered• Conversion rates include: miles per gallon and
miles per hourI need Inputs
Marketing is an Abstract Machine
• It needs inputs and has outputs• Inputs: The Four P’s of the marketing mix• Outputs: Profits, Revenues, Demand,
Customer Satisfaction• Conversion rates: measured as profits
returned per dollar of marketing expense, revenues generated per sales call, units sold per advertising insert, etc.
Marketing Machine: 4 P’s as Inputs
The Marketing Machine
Many Inputs to The Marketing Machine
Price Tags
Product Quality
Promotion
Place
Many Outputs from The Marketing Machine
Revenues, RQuantity of Goods Sold
Gross Profits, G
Customer Satisfaction, S
Now I am the manager of
this machine
Customer Awareness, WMarketing Profits, Z
Basic Premise
• Marketing Managers know how to drive a marketing machine
• Marketing Students must learn to drive a marketing machine
• Driving a marketing machine can be compared to driving a car
Consider the Situation of
• Driving a car for a distance and evaluating your car’s performance compared to the performances of other cars
• is similar to • driving a marketing machine to produce
profitable sales and comparing your marketing machine’s performance to the performances of other marketing machines
Both Cars and Marketing Machines
• Are very complex machines• To learn Driving• We start with highly simplified Models • Of Cars as Transportation Machines with the
desired outcome of a distance travelled• Of Marketing Machines as a business
machines with the desired outcome of generating profitable sales
A Car is a Transportation Machine
• There are many potential goals and objectives that could be assigned to a car as a transportation machine
• Its primary and overarching goal is to maximize the distance it travels
• The primary output of a transportation machine is measured by the number of miles it travels
Marketing as a Business Machine
• There are many potential goals and objectives that could be assigned to marketing as a business machine (demand, revenue, profit)
• Its primary and overarching goal of the marketing machine is to maximize profitable sales
• A basic metric for measuring the output of the marketing machine is the number of things, goods and services it sells
• The most popular metric for measuring marketing output is the number of dollars, $, it generates
The Performance of a Car
• As a transportation machine is measured in terms of three dimensions
• 1) number of miles travelled (Output)• 2) amount of resources the car uses to travel
the miles (Inputs) • 3) the efficiency of the car at converting the
inputted resources into miles driven (Conversion rate) measured as miles per input mpg and mph
The Performance of a Marketing Machine
• A Marketing machine is measured in terms of three elements
• 1) number of dollars generated (Output)• 2) amount of business resources the machine uses to
produce marketing profits (Input)• 3) the efficiency of the marketing machine at converting
the business resources into dollars of profit (conversion rate) measure as dollars of profit per dollars of expense
• Sales Returned on Advertising, Profit Returned on Marketing
There are many possible• Metrics for measuring inputs • A transportation machine such as a car has inputs• Amount of fuel, Number of hours it is driven• and converts them into miles of distance travelled• A marketing machine such as a coffee shop has
inputs• Number of servers working, Number of hours the
shop is open• and converts them into dollars of profits generated
A Basic Car
The Car’s Conversion
Processmiles per
gallon
gasoline
Strange looking
Car
Miles Travelled
gasolinegasoline
gasoline
Miles Travelled
Miles Travelled
Simple Models of A Car’s Performance as a Transportation Machine
Input to the Car, I Gasoline: Gallons, G
Conversion rate, r = O/I
Miles per gallon, r = mpg or M/G
Output from the Car, O = r x I
Distance travelled: Miles, M
A better car and driver will get more miles for the same resources than a poorer car and driver.
Simple Models of A Car’s Performance as a Transportation Machine
Inputs to the Car, I Gasoline: Gallons, G
Driving Time: Hours, H
Conversion rate, r = O/I
Miles per gallon, r = mpg = M/G
Miles per Hour, r = mph = M/H
Output from the Car,
O = r x I
Distance travelled: Miles, M
Distance travelled, Miles, M
A better car and driver will get more miles for the same resources than a poorer car and driver.
A Basic Marketing Machine
Marketing MachineCups sold per server
It looks like A Two-
Factor marketing machine
Number of servers hired
Number of servers hired Number of
servers hired
Number of servers hired
Profit from Cups of Coffee sold
Profit from Cups of Coffee soldProfit from
Cups of Coffee sold
Simple Models of Marketing Machine Performance
Inputs to the Marketing Machine, I
Number of Servers Hired: S
Conversion rate,
r = O/I
Profits Returned per Server, Return on Serversr = Z/S
Output from the Machine, O = r x I
Dollars of Marketing Profits, Z
A better marketing manager and machine will generate more dollars of profits than an average marketing machine and manager
Inputs to the Marketing Machine, I
Number of Servers Hired: S
Number of Store Hours, H
Conversion rate,
r = O/I
Profits Returned per Server, Return on Serversr = Z/S
Profits Returned per Hour, Return on Hoursr = Z/H
Output from the Machine, O = r x I
Dollars of Marketing Profits, Z
Dollars of Marketing Profits, Z
A better marketing manager and machine will generate more dollars of profits than an average marketing machine and manager
Simple Models of Marketing Machine Performance
Called Two-Factor Machines
• The amount of output from the machine, O• Is determined by Two Factors• Factor #1) the amount of Input the machine
uses, I• Factor #2) the machine’s conversion rate or
the efficiency of the machine’s ability to convert Inputs into Outputs, r = O/I
Many Types of Inputs
• Business Machines have many types of resources, investments and activities that can be considered Inputs for a marketing machine
• The Inputs for Marketing machines have been classified as the 4 P’s of the marketing mix
• Selling Price• Product/Service mix• Promotion/Communication mix (advertising, sales people,
events)• Time and Place mix (hours of operation, location,
furnishings)