Ch. 11App: The Financial Impact
The Financial Assessment Process
• Budgetary considerations play a role in the identification,
evaluation, and control of alternative marketing strategies.
• Top executives must be convinced that the marketing plan and
strategy are a good value for the firm.
• The ratio of the plan’s costs compared to expected returns will be
a deciding factor in determining which plans receive approval
and funding.
• Performing a financial assessment of the marketing plan requires
a working understanding of both finance and statistical analysis.
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Financial Assessment Tools (1 of 2)
• Contribution Analysis
– Attempts to determine the amount of output (revenues) that
can be expected from a given set of inputs.
– The formula for contribution analysis:
• Response Analysis
– Addresses the question of incremental change. The goal is to
estimate accurate response coefficients that can be used to
predict the change in sales volume based on a change in one
or more elements of the marketing mix.
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Sales Response to Advertising Expenditures
Exhibit 11A.1
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Financial Assessment Tools (2 of 2)
• Systematic Planning Models
– Marketing managers often use a planning model to estimate
the financial effects of marketing activities proposed in the
marketing plan.
– The inclusion of a detailed planning model in the marketing
plan can assist the marketing manager in convincing top
executives that the implications of the proposed marketing
plan have been considered carefully.
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Exhibit 11A.2
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Exhibit 11A.3
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