Market-Based ManagementWhat typifies successful businesses?Success/Profitability DriversSlide 4Marketing Orientation Requires……A Market-Based Management System...External Performance MetricsInternal Performance MetricsMarket-Level ProfitabilityImpact of NMC on net profit….Breakdown of NMC FormulaImpact of NMC on Marketing Strategy...Market-Based ManagementWhat typifies successful businesses?Success/Profitability Drivers1. Market attractiveness2. Competitive advantage3. Market orientationMarketing Orientation Requires……Market-based organizational structureMarket-oriented employeesMarket-oriented cultureMarket-based management systemsA 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 customerInternal Performance MetricsSalesROINet profitsMarket-Level ProfitabilityHow do marketing expenses impact a firm’s profitability?Net Marketing Contribution (NMC)= MarketDemandMarket SharePrice/ Variable Cost/Unit Unitx x -Marketing Expenses-Impact of NMC on net profit….Net Profit=NMC-OperatingExpensesOverheadExpenses-Breakdown of NMC Formula Market x Market x (Price/unit - VC/unit) - Mkt Expenses Demand ShareMkt Demand (in units) x Mkt Share = Sales volume in unitsSales vol. in units x Price/unit = Sales volume in dollarsPrice/unit - VC/unit = Contribution margin (CM)Price/unit x %margin = Contribution margin/unitPrice/unit - contribution margin/unit = Variable cost/unitImpact of NMC on Marketing Strategy... MarketDemandMarket SharePrice/ Variable Cost/Unit Unitx x