Transcript

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)

Any Questions?

• Is every one comfortable with • 1)the concept of the marketing process as a

machine which converts the 4 P’s of marketing inputs into outputs of profits, revenues, etc.?

• 2) A simple machine Machine Converts a single metric as an input into a single metric output!


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