Profit Impact Marketing Strategies
Profit Impact marketing strategies (Pro-IMS) - I will summarize the most important factors that I have gone in to
developing profit-impact marketing
strategies that you can use it to develop your own system of
monitoring profitability of marketing strategies implemented.
of ROI (Return on Investment) or ROE (Return on Equity) is very important
– it is a measure how much have you invested in your business and the
profit that you are earning from it. For example if your investment is
$10,000 and your ROE is 10% it means that your profit for that year is
$1,000. What should the ROE be for your business? - check publicly available
statistics or trade associations and always try to achieve the highest
possible ROE - this will motivate you to aim high.
this model (it's called Pro-IMS) I have used marketing channel as the basis
of determining market strategy profitability but you can replace this
with whatever suits your particular industry.
potential market is the total demand that there is for your product
or service - identify the size of the market through market research. If you
are catering to a smaller segment of the market (also known as a niche
player) you should be careful that you do not overestimate the size of the
market, since this adversely affects your ability to convert sales leads.
The poor sales conversion is due to lack of focus on your niche customer
requirement or not catering to a particular niche requirement..
potential market has been recognized ensure that all sales leads are
being logged as this provides invaluable information on customer wants. Also
ensure that leads are being generate cost effectively.
leads conversion ratio (how many real sales are made from sales leads)
needs to be checked continuously and reason for any decline in lead
conversion needs to be explained early.
attempts should be made to increase average sale value per customer
for this item alone a separate market and sales tactic needs to be
is a technical point that the Pro-IMS hinges on is the sales mix among
channels/ strategies is based on contribution cost ratio of each. A
larger portion of sales effort is directed at the channel/ strategy with a
better contribution cost ratio.
chief advantage of the Pro-IMS model is that you are able to achieve target
ROE at a lower than target sales level - which is a lower risk strategy.
is crucial that the following ratios be assessed monthly/ weekly:
leads/ Potential market - if the leads are low then
advertising/marketing campaigns need to be reassessed or the potential
market needs to be re-evaluated (especially if it is a niche market)
& Selling cost/ Sales leads - is your marketing campaign cost
& Selling cost/ Sales - this could also be used as a means of
measuring the selling effort.
Sales Lead - If this ratio is low then selling techniques need to be
reviewed carefully. It might also be a problem with the selling proposition
- does it meet the requirement of the (niche) market.
Average Sale/ Required Average Sale
The Pro-IMS system has been graphically illustrated in the diagram below:
Some things to keep in mind in implementing your marketing strategies:
Careful of the high cost of inventory - in attempting to increase sales, inventory levels
invariably increase, this reduces your profitability.
interest cost of debtors - level of debtors will increase if more sales are made on
credit - think 'outside the box' on ways of making more cash sales.
cost of funds - cost of borrowing increases as more funds are required.
mix - selling more of a low profit product will bring down overall profits -
so check product profitability
mix - service only 'profitable' customers - look at our CRM
articles for more pointer on this..
salary cost of employees - maybe outsourcing or automation is an option.
It should be noted that most companies that try to increase
there sales also increase their overheads resulting in lower profits.
Profit impact marketing template is a measure to
ensure that sales are increased without affecting overheads/ costs.
The Excel workbook that can be used as a guide for Pro-IMS
and the steps that can be used is given below:
the current ROE of the business.
Set a target ROE to be achieved.
Identify the new profit that should be achieved to get
to the target ROE. What should be your target ROE? The best target ROE
will be the highest for your industry (you might have to do some research) and
benchmark against the best!.
the profit figure calculated in (3) above work out the sales that should be
that you know the new sales figure that should be achieved (for target ROE)
devise marketing campaign to hit new sales target
To control costs of marketing campaigns use the
‘Profit Impact Marketing Template’.
Use instructions given in the profit-impact.doc file to
fill out the Pro-IMS Excel file
the link here to look at the Pro-IMS Excel model
For a detailed e-booklet and Excel model on how