Chapter 14: EVALUATING PERFORMANCE

CHAPTER 14

Evaluating Performance

TO PERCEIVE THINGS EARLY ON IS INTELLIGENCE . — LAO-TSZE

NO MARKETING PLAN , nor the management put in place to implement it, can avoid the need to respond to marketplace changes. After all, the marketing plan is simply a forecast of how a company’s products will progress in any particular market. No marketeer has ever gotten that prediction completely correct the first time, nor has the market remained unchanged for very long after a plan’s implementation. International marketing is a complex issue, even for small companies. Projects of all sizes run the risk of becoming so involved in daily functions that marketing managers fail to audit their progress. When this happens, the ability to plan for the next marketing phase is greatly diminished. The only way to combat this problem is to have a regularly scheduled monitoring and evaluation of the marketing plan.

Sales Analysis: Are You on Course?

Prior to market entry, sales goals must be set in order to determine the level of acceptability of the product by consumers and to provide a base for forecasting revenues and expenses.

Sales goals should be set at realistic levels and determined objectively. Goals should be based on the potential of the new market, not on domestic market experience. Always make conservative estimations of sales growth. Marketeers who have been successful in their home market often forget the amount of time it took them to reach that level of sales revenue. Expecting to duplicate that hardwon success on a compressed time scale in a new market will cause disappointment (or worse) in even the most receptive environment.

A company can divide its fiscal year into whatever size portions it finds easiest to manage while still giving timely information. The most common method is to have twelve periods that correspond to the months of a year. Unfortunately, all of the months aren’t of equal length; some companies work instead on thirteen four-week-long fiscal periods per year. This allows marketeers to make more accurate comparisons among the various sales periods to determine where “peaks” and “valleys” truly exist. Much of the decision regarding this matter will be based on the type of product being sold and on consumer buying patterns. NOTE: Some large retailers have taken advantage of bar-coding technology to track their sales on a minute-by-minute basis. This form of “real time” sales auditing allows for very precise inventory control and consumer feedback.

The key to proper sales analysis is accuracy and consistency. While marketing is rarely mentioned in the same breath with accounting, the two disciplines are

closely related. Marketing sets forth the goals of a company and accounting determines if those goals have been met. It’s essential that marketeers understand financial accounting in order to track their sales and adjust their marketing plan. Many a company has come to regret the decision not to maintain a firm control of their accounting processes. This can be even more critical when operating on an international scale with few personnel. An old saying in business states that “figures never lie, but liars always figure.” WARNING: Keep accounting internal and keep an eye on it.

Overseas operations should be sending frequent updates to regional offices or headquarters. Weekly reporting is most common although communications technology and computers make more frequent analysis possible. Even a small company or solo marketeer should review sales figures as often as time and input permits. Forecasts may be devised on a monthly cycle, but daily or weekly review of sales figures will allow a marketeer to spot upward or downward trends. There’s little value in waiting until the end of the period to discover that adjustments could have been made early on to achieve forecast.

Understanding financial accounting is part of a successful marketeer’s “education”; this will keep the company in the marketplace longer and safeguard its resources. Computers and accounting software (much of it in “template” formats for smaller companies) can make the sales analysis process far less time consuming. NOTE: Sales revenue is the measuring stick with which to gauge the marketplace. Make sure that your gauge is accurate.

Market Share Growth: The Seeds of Expansion

Each company embarking on an international marketing scheme is doing so in the hope of expanding its market segments. Once the larger national segment has been penetrated, the marketeer can turn attention to expanding their share within that market, further segmenting it, or moving into another market entirely. None of this ought to be considered without properly auditing and evaluating the progress of the company to date.

A common phrase in international business is that “to cease to grow is to die,” and this psychology certainly points to the competitiveness of the marketplace. Growth may be healthy, but unplanned, unrestricted growth is as deadly as no growth at all. Healthy growth must be laid on top of the profitable and stable foundation of previously successfully market planning. Even large, global “conglomerates” (e.g., Coca-Cola, Matsushita) have had to retreat from expansion as they came to realize that their reach exceeded even their considerable grasp. Such resource draining “retrenchments” can happen on the small scale as easily as on the large.

Most mistakes that occur when a company expands into areas that prove to be quagmires rather than gold mines stem from looking ahead before determining current positioning. The penetration of a foreign market suddenly expands the view of possibilities and the temptation to pursue new areas immediately is

alluring—especially when a marketeer has had some early success in the new market. Prospective market segments within a larger national landscape require as much planning as the original market entry. Equally needed is the discipline of knowing that past successes can’t always be duplicated in new situations. Proper and unemotional evaluation of the company’s current status will make the choice of when to expand a more accurate process. Remember, the word opportunity originally meant “in the proper season”; savvy marketeers know that they must plant in spring if they want to harvest in autumn. Evaluation lets you know what season it is and how your crops are doing.

Tracking Satisfaction: Giving Customers What They Want

Another area that requires evaluation is customer satisfaction. Assuming that if consumers are buying the product, they must be satisfied with it is a dangerous bit of logic. Consumer tastes are always in a state of flux. The sudden arrival of a competitor can make a company realize just how dissatisfied consumers actually were. Many companies in markets formerly protected by government edict (e.g., Lada Autos in Russia) came to this realization the first time that local consumers were given a chance to buy foreign products. Brand satisfaction (or loyalty) turns out to be a chimera.

Even in open markets, consumers sometimes continue to buy an unsatisfactory product just because they haven’t been exposed to an alternative. Major U.S. breweries like Coors and Miller discovered this when the sudden appearance of microbreweries drained away market share at an alarming rate in the mid-1990s. Consumers wanted fuller-bodied beer but had not been given the option until that point. Megabrewers responded by putting out quasi-microbrews in direct competition with their own products. Some even attempted to disguise the fact that they were behind the marketing of the new products in order to retain a “little guy” image.

What happened in both of these examples is that companies began to believe they controlled their own success. In reality, it’s the consumer who calls the tune to which marketeers must dance. The same type of research and analysis skills that brought the marketeer into the foreign market in the first place must be continually deployed to find out what type of “music” consumers are going to play; though companies can certainly make suggestions via advertising and promotions.

The greater the competition in the marketplace, the more often a company will have to evaluate consumer wants, needs and beliefs. Understanding consumer behavior is at the root of all marketing success and it solidifies the link between the buyer and the seller. If a producer isn’t willing to evaluate and attend to that link, a competitor will be more than happy to become the new “dancing” partner.

Marketing Audit: Back to the Drawing Board

The marketing audit is a systematic appraisal of an organization’s preparation, implementation, status and prospects of its marketing plan. An audit can be a very time consuming (and, if improperly conducted, traumatic) process, with

repercussions throughout the organization, as well as in its distribution channels. It often uncovers failings that have been “swept under the rug” or simply forgotten. It involves personnel at all levels and is conducted both inside and outside of the company structure. An audit gathers the data and provides the analysis that allows a marketeer to properly evaluate the marketing plan. Conducting the audit isn’t always an agreeable process but it must be done. WARNING: Rest assured that a competitor—somewhere—is sizing up your company’s performance, even if you choose not to do likewise. When a competitor knows more about your company than you do, failure isn’t far away.

A detailed outline of the areas covered by a marketing audit is included in Chapter 16 of this book. At this point, some guidelines for the scope and use of the audit need to be discussed.

OBJECTIVITY Companies of all sizes have a difficult time maintaining objectivity about the value of their own planning processes, especially when the plan is still in effect.

Objectivity decreases in proportion to the size of the company, with solo marketeers having the least. Unfortunately, an audit that lacks objectivity is worse than no audit at all, because it has the semblance of truth. A company that has the resources may choose to hire an outside service to conduct the audit, but that requires turning over information that may be sensitive. If the company is operating in a foreign market with little in the way of commercial law and binding nondisclosure statements, outside auditing may not be an option. The reason company personnel lack objectivity is that they fear blame and seek praise, both very human responses. Objectivity must start at the top with the marketeer and infuse all other personnel. The audit should be conducted in an atmosphere that simply takes the facts as they are and makes necessary adjustments to get back on track. Blame and praise shouldn’t be part of it. Even a solo operator needs to view the audit as a chance to make course corrections, not jump overboard. For this reason, audits ought to be performed regularly (at the very least, every six months, preferably every fiscal quarter) so that they can be seen as a normal part of an ongoing process. Besides reducing the tension level, frequency of audits makes for more efficiency, as auditing personnel gain greater familiarity with what to look for and where. NOTE: Unlike financial audits, which are done randomly to uncover surprises, marketing audits are designed to prevent surprises.

INPUT

The marketing audit isn’t just an internal assessment. Even those portions that are done internally aren’t restricted to management personnel or their functions. Marketing encompasses every aspect of a business organization’s dealings. Even when a marketeer is a solo operation, the suppliers, distributors, agents, shippers, freight forwarders, ad agencies, media buyers, retail sales personnel, warehouse operators, and, most importantly, customers will be called upon to make contributions to the auditing procedure.

NOTE: When building the distribution chain, all prospective candidates must be willing to participate in the marketing audit as part of the price of admission. This doesn’t mean that they must throw open their financial records to auditor scrutiny, only that they be willing to explain and alter their processes. Some channel members may rely on their ISO 9000 status as a sign that they’re open to such outside inquiries.

WHO WILL AUDIT ? Large global corporations with sizable resources will use any one of a number of international consulting groups (e.g., KPMG, Boston Consulting Group,

McKinsey) to conduct the marketing audits. Similar services are open to smaller companies that have the necessary resources to fund such external auditing. While these external consultants can certainly lay claim to a great deal of objectivity, they’re still outsiders and may cause resentment. Also, external auditors being used for the first time have a slower “learning curve” when it comes to contacting the correct personnel in order to access necessary information. Most small- and medium-sized companies that operate on a limited international basis use their own internal personnel to perform the marketing audit. Like financial auditors, these personnel must be given unlimited access to the company’s records and full cooperation from staff at all levels. It’s not recommended that members of the market planning team be used for the audit unless they’re overseen by management from another department. Company executives should avoid becoming involved unless company size dictates otherwise; it’s wiser to use strong middle-management personnel to oversee the process. An audit can be very expensive (especially when consultants are used), but the results can more than pay for themselves if the audit is thorough and the analysis keen. The cost can be distributed among all departments as an administrative cost or charged directly to the marketing account. Whatever the case, it should be budgeted as part of normal business planning and given sufficient funding to get the job done correctly. WARNING: An incomplete audit done “on the cheap” is more costly in the long run than one done properly.

ACCOUNTABILITY Accountability isn’t the same as blame; it’s more akin to responsibility than fault finding. When evaluating the results of the audit, a marketeer must assign responsibility for fixing problems rather than pinpointing those who made mistakes. (Only when mistakes are absolutely egregious or intentional should any punishment be doled out to internal staff. Also, in some markets, politically sensitive relationships with distribution chain members may preclude any immediate actions, should those members prove to be part of the problem.)

Ultimately, upper management (or the solo marketeer) must be fully accountable for the design and implementation of the marketing plan. If the audit proves that the plan is indeed effective and well implemented, much is to be gained by spreading credit for that success throughout the organization and distribution channels. If major problems come to light, it’s best for the executive(s) to take full responsibility and then turn attention immediately toward remedial action.

NOTE: Marketing efforts and their implementers must remain highly motivated to get the job done right. Savvy marketeers won’t succumb to the urge to sacrifice long-term success for short-term retribution.

EFFECT ON FUTURE PLANNING A proper audit and evaluation of a marketing scheme can pay benefits well beyond the project it was designed to survey. Problems, successes and potential innovations that are uncovered can be applied to other ongoing projects or to planning market entry elsewhere. The evaluation will be of particular use to companies that have only just recently embarked on the international marketing scene. Lessons can be learned from successes as well as failures, and marketing plan evaluations should be kept as part of a company’s performance records (a.k.a. knowledge database). While no two markets are exactly alike, a good audit of current planning will prevent the marketeer from having to “reinvent the wheel” for every new national market or market segment. NOTE: All people and companies need to learn from experience. The evaluation serves as a clear record of that experience.

CUSTOMER COMMITMENT: KEEPING YOUR PROMISE Making a commitment to the customers of each market segment is the essence of a good marketing plan. It’s very easy indeed to make that commitment early in the planning process, but it can be difficult to maintain it as time goes by and the relationship becomes all too familiar. The customer may have the right to take the marketeer’s commitment for granted, but the marketeer must constantly renew the relationship. Keeping a focus on the needs and wants of customers is the determining factor in whether a company achieves long-term success in the marketplace. When operating internationally, that focus will require additional effort right from the start. Understanding the cultural, economic, political, and historical motivations of each targeted segment requires considerable research and insight. This effort is just the beginning of a much larger commitment to those new customers to grow with and service their needs over many years. More than an obligation between a company and a market segment, it’s a promise among people. The willingness to make this commitment brings with it the excitement of opening up new markets and expanding revenues and global relationships. Most importantly, it brings the satisfaction of a job well done and a promise kept.