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MARKETING MANAGEMENT
WITH A FINANCE EMPHASIS
OR
MARKETING FINANCE INTERFACE
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.. The system of value exchange.
.the process of discovering and translating
consumer needs and wants in to product and
service specifications, creating demand and thenexpanding demand.
The management function which organizes and
directs all those business activities involved in
assessing and converting customer purchasing
power in to effective demand for a specific
product or service and then by selling the
product to the final consumer achieving the
profit target set by the company.
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Wealth of a society increases thro increase
in added value.
Example : handloom products.
The economy benefits by
-greater quantum of capital formation
-grater revenue to the exchequer
-higher employment-increased buoyancy in economic activities
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A marketing oriented approach.
Determining from the market, the direction
for planning and decision making .
satisfying wants and needs of the customerat optimum level of profit.
What is product concept?
What is selling concept?
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selling marketing
Production capability
Selling a product or
service
Push
Aggressivesalesmanship
Short to medium term
Market acceptabilityor product- marketcompatibility
Need identificationand fulfillment
Pull
Creating a marketniche
Medium to long term
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While selling While marketing
Automobiles
Bread
Cash registers
Mattresses
Tea
Calculating machines
computers
Transportation
Nutrition
Protection
Comfort
Beverage
Business machines
Information
technology
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Particular location?
Geographical territory?
Customer or a group of customers?
A category of customers?
Specific applications ,end uses of a product?
People?
Marketing is?
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Buyers market
Sellers market
Consumer goods market
Industrial goods market
Service market banks, insurance, travel,
cons
Social market social service education,family planning, health care, literacy drive,
rural development.
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Dividing the market in to several sub-markets
Each of which is of significant characteristics
And together forms a homogeneous group.
The purpose of segmentation is to determine
differences among buyers which helps in
marketing to them.
Geographic, demographic, social,
psychological etc
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Geographic
Demographic
Psychological
psychographic
region, climate, sizeof city, populationdensity
Age, sex, marital
status, Income,education, occupation
Motivation,personality, attitudes,
values
Lifestyles, interests,opinions
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Social
Socio-cultural
Use-related
Use-situation
benefit
Social class, status,family life cycle
Culture, sub-culture, cross
culture, religionUsage rate,
awareness status,brand loyalty
Time, objective,location, person
Prestige,confidence, health,nutrition
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Securing measure of control over the demand
of a product by advertising and promoting
the differences with the competing products.
Make it appear special in respect to quality,style, image, functional features, price etc.
The aim of segmentation as well as product
differentiation is to achieve market
effectiveness.
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Market size
Market share
Marketing mix product, price, promotion,
place, people, process, physical evidence
Environments: regional, national,
international
Marketing research antenna
Marketing mix exercise?
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A FIRM OR BUSINESS HAS TO SURVIVE AND
GROW.
EFFICIENTLY USE ITS RESOURCES VIZ. MEN,
MATERIAL, MACHINES, MARKET, MONEY.MOST IMPORTANT IS MONEY IT MAKES YOU
ACQUIRE ALL OTHER RESOURCE.
MONEY FOR FIXED ASSETS, MONEY FOR
WORKING CAPITAL
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FIXED ASSETS / CAPITAL WORKING CAPITAL
LAND
BUILDING
PLANT
MACHINARY
EQUIPMENTS
ALL ITEMS WHICH ARE
USED FOR A TIME
OVER ONE YEAR
DAY TO DAY REVENUE
EXPENSES LIKE
MATERIAL PURCHASE
PAYMENT OF WAGES
OVER HEAD EXPENSES
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INTERNAL EXTERNAL
OWN CAPITAL
INTERNAL EQUITIES
FOR FIXED ASSETS
FIXED ELEMENTS FOR
MOBILZING WORKING
CAPITAL
LOAN CAPITAL
EXTERNAL EQUITIES
EXTERNAL FINANCE(SHORT TERM)IS USEDFOR WORKING CAPITAL
LONG TERM EXTERNALFUNDS FOR EXPANSION/REPLACEMENT OFFIXED ASSETS AND
MODERNIZATION/DIVERSIFICATIONPROGRAMS
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CAPITAL GAINS / EXPENDITURES REVENUEINCOME / EXPENDITURE
Capital gains means
gains accruing from
the sales / disposition
of capital assets. Capital expenditures
are those incurred for
acquisition of assets
to be used for more
than one year
Revenue income i.e.accrue from normalbusiness operationslike sales, interestreceived, commissionearned.
Revenue expenditure
-salaries / wages
-travelling expenses-depreciation of
assets, bad debts
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A revenue expenditure involving a huge some
of money specially if it is found that the
benefits of such expenditure will be accrued
or felt for many a years to come. The expenditure in such cases may be
divided in 3 ,5, or 10 parts depending on the
no of years the benefit is estimated to be
applicable. E.g. a huge ad expense, R & D expenses,
NEW PRODUCT DEVELOPMENT EXPENSES
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Repairs of chairs and benches in a school for
Rs.10,000.
Purchase of machinery Rs.50,000. by a dealer
in machinery and equipment. Transfer of Rs.12,000.worth of furniture from
his furniture factory to his office for office
use.
Alteration expenses of Rs. 10,000. to widenthe canteen space of the factory.
Loss of sale of old furniture Rs.5,000.by PQ
LTD.
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AN AMOUNT OF Rs.1,00,000. paid to some
management consultant to advise on the
capital structure planning of a company AB
LTD WHICH CONSIDERING MAJORSTRUCTURAL CHANGES.
Preliminary expenses incurred by XY LTD
Rs.10 lakhs in connection with initial issue of
shares
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FINANCIAL ACCOUNTING: BOOK KEEPING OR
RECORDING OF FINANCIAL TRANSACTIONS.
COST ACCOUNTING: ACTUAL COST FINDING
MANGEMENT ACCOUNTING: PRESENTATION OF
ACCOUNTING INFORMATION TO ASSIST
MANAGEMENT DECISIONS
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Planning
Organizing
control
Ascertainment offinancial needs
Determination of
sources of finance Procurement of
funds
Allocation of funds
Monitoring of fundswith regard toutilization
Financial discipline
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auditing taxation
Critical examination
of books of accounts
to check their
accuracy Also detect and
prevent errors and
frauds
External audit Internal audit
Direct tax income
tax
Indirect taxes sales
tax, excise duty,octroi etc.
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insurance Personnel schemes
Insurance of assets
and property
Vehicles
Stocks insurance
Loss of profit
insurance
Provident fund
Superannuation
Gratuity
Group and accident
insurance
Executive commission
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Product planning/portfolio
Product pricing
Product profitability analysis evaluation of
marketing performance.
Functional cost analysis to achieve cost
effectiveness
Effective budgetary control systems in
marketing.
Marketing investment decisions.
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Sale on consignment basis
Leasing and hire purchase transactions
Interest on credit granted
Bills of exchange and hundies
Recovery of excise duty thro invoicing.
Recovery of sales tax both central and state.
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The three components are a perspectiveview of marketing finance.
COST:
-setting up and running a marketingorganization
-the capital costs including depreciationand ammortization.
- recurring costs
REVENUE: what the organization earns
PROFIT/LOSS IS A FUNCTION OF REVENUE&COST
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To keep recurring ops going in marketing, thereare two types of INVESTMENTS.
1.Investment on capital assets(motor cars,warehouses, office equipments ,etc.)
2.Investment for working capital: inventory,account receivables etc.
Such investments cause further costs
-depreciation or diminution of capital assets,
inventory, value of amount to be collected-financing or interest charges on investment
RETURN ON INVESTMENT(ROI):
REVENUE - COST/INVESTMENT
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NET PROFIT
ROI = ----------------------------
CAPITAL EMPLOYED
NET PROFIT SALES
= ---------------------- * ------------------
SALES CAPITAL EMP.
= Net profit ratio * capital turnover ratio
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1. COST FINDING
2. COST CONTROL
- COST REDUCTION
- COST EFFECTIVENES
3. COST ANALYSIS
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THE PRINCIPAL IS 2+3+4
2 TYPES OF COST: Direct and Indirect
Direct Cost is called Prime Cost
Indirect Cost is called Overhead 3 ELEMENTS OF COST: Material
Labour
Expenses
4 STAGES OF COSTD
ETERMINATION: Prime Cost
Factory Cost
Total Cost
Cost of Sale
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Rs. Rs.
DIRECT MATERIAL 30
DIRECT LABOR 20
DIRECT E E SES
1. PRIME COST
WORK OVERHEADS 1
2. WORK COST 70
OFFICE OVERHEADS 7
3. TOTAL COST 77
SELLI G & DISTRIBUTI OVERHEAD 3
4. COST OF SALES 80
PROFIT
SELLI GPRICE
20
100
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1. NET TURN OVER
2. PRODUCTION COST OF SALES:
DIRECT MATERIAL
DIRECT LABOR
PRODUCTION OVERHEAD
3. GROSS PROFIT (1 2)
4.NON-PRODUCTION OVERHEADS:
SELLING OVERHEAD
DISTRIBUTION OVERHEAD
R & D COST
5. NET PROFIT before INTEREST, DEPRECIATION,and TAX ( 3 4 )
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Determination of marketing costs product
wise.
Evaluation of managers according to their
cost responsibilities. Analysis of cost involved in serving different
class of customers
Cost per sales call, per order,
Decisions-making regarding differentchannels, markets, regions
Product profitability for differing levels of
promotional expenses
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DIRECT SELLING COSTS salesman salary,commission, travelling, entertainment etc.
ADVERTISEMENT AND SALES PROMOTION COSTmedia ads, brochures, catalogues etc
MARKET RESEARCH in-house, external hire.
DISTRIBUTION COSTS transportation,warehousing and storage, insurance, etc.
CREDIT AND COLLECTION cost of collectionstaff, bad debts, cash discount.
FINANCIAL AND GENERAL ADMIN cost ofsales invoicing, interest in working capitallocked in finished goods and recievable
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ORDER GETTING COSTS market research
expenses, advertisements, sales office
maintenance, salesmen salaries, travel, sales
promotion etc.ORDER FILLING COSTS order processing,
warehouse, finished goods inventory carrying
costs, transportation, packing, installation,
credit collection, repairs during warrantyetc.
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FIXED COSTS sales department salaries,
rents of sales offices, warehouses etc
VARIABLE COSTS all the rest viz. packing,
transportation, installation , commissions,discounts etc.
Only variable costs can be identified with
products for product viability analysis
the fixed costs are set off againstcontribution earned by the product grp.
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To achieve max return on cost
E.g. 1. trying out alternate modes of
distribution with varying cost estimates
2. quality and quantity of ad responses.
RELEVENT COST ANALYSIS helps in new
product introduction, dropping a product or
product line, changing the productionprocess etc
LIFE CYCLE COSTING