Abstract
In modern times, advertising and sales promotions are useful marketing and brand development tools. At organisational level, a strong brand translates into increased sales and profitability. However, due to the high promotion and advertising costs, controlling the marketing budget is important, as it helps an organisation manage its expenditure in order to achieve its goals and objectives. The first part of this paper describes the marketing budget of a health care home, its staffing plan, and ways of achieving budgeting effectiveness and efficiency. The second part summarises three articles that focus on marketing and budget control. Important insights into the ways of measuring marketing productivity, advertising and promotion expenditure allocation, and computation of returns are provided.
Introduction
An annual financial plan gives clear guidelines to an organisation on the percentage of revenue to be spent on marketing based on the projected profit. A marketing plan, which is drawn from this financial statement, displays an organisation’s “revenue growth goals and costs attached to each marketing event” (Kotler, 2003, p.112). Most firms allocate between 6 and 15 percent of their profits to marketing campaigns; however, this budget varies depending on a firm’s industry and financial structure. This paper presents the marketing budget and control for a healthcare organisation, Charity Home, which offers full-time care services to seniors. In addition, the writer’s reflections on the contents of three marketing-related articles are included in the second section of the paper.
Marketing Budget
According to Kotler (2003), the list of marketing events that will enable a firm to realise its goals should be pegged on the organisation’s “average sales and closing percentage” (p. 59). In this regard, the number of marketing events will depend on Charity Home’s average projected revenue. Charity Home, being a start-up, projects a $200,000 in annual sales for the 2014/2015 financial year. The organisation will devote 8 percent of this revenue to its marketing budget, which translates to $16,000.
Charity Home’s marketing campaigns will target an elderly population of about 3,400 clients. This figure includes seniors without family support and post-discharge elderly patients living within Yorkshire County. Kotler and Armstrong (2013) state that, to penetrate different market segments, a multi-segment marketing strategy, which includes multiple promotional approaches, is important. Charity Home will promote its services using various marketing strategies, including online promotions, personal selling, and referral marketing. To make 3,400 marketing impressions, Charity Home will spend $6000 on social media marketing (Facebook and Twitter), $8000 on personal selling, and $2000 on referral marketing. Personal selling will involve visits by the organisation’s representatives to senior clubs to market its services. On the other hand, through referral marketing, the current clients will be encouraged to give the contacts of their elderly friends and relatives who may need our services.
Staffing Budget
As a young organisation, a lean workforce will help Charity Home reduce labour costs. Four categories of employees will be needed to run this facility. The home will need a relatively high number of registered nurses (RNs) who will provide specialised care to clients. The second category of employees needed in this facility includes licensed practical nurses (LPNs) who will assist the RNs in care delivery. Nurse aides will also be needed to perform activities such as cleaning, patient care, and laundry.
The facility will also need the management unit to run the facility, supervise the staff, and promote stakeholder collaboration. A noteworthy fact is that the management staff, who are not involved in providing care to clients, will not benefit from overtime (extra patient hours) pay. Based on this staffing pattern, a budget for all the employees needed to run this facility is presented below. It includes the number of employees needed in each category and their respective wages and benefits.
Staffing Budget.
Total wages 720.
Enhancing the Efficiency and Effectiveness of the Plan
A firm’s workforce is an essential asset because employees facilitate the achievement of organisational goals and objectives (Kotler, 2003). In health care, poor staff planning leads to work overlaps, which affect service delivery and patient outcomes. The staffing plan presented will help Charity Home provides the best care to clients at all times. Under this plan, five health care professionals comprising of three RNs, an LPN, and a nursing aide will be available at the facility at all times. This staffing plan will ensure that there is a high patient/nurse ratio and help monitor the activities of the LNPs and nursing aides. The RNs will oversee their activities to ensure quality care delivery while the home manager will provide overall supervision.
Besides adequate staffing, efficiency and effectiveness will be achieved through monitoring of the facility’s expenditure. To reduce labour costs, nurse aides will perform less demanding tasks (less expensive) while the RNs will only offer specialised care. The facility will also adopt a flexible staffing pattern to ensure lean, but adequate and efficient workforce. The facility will also purchase the latest medical equipment to help in patient physical assessment and care. This will help improve the quality of health care offered, which will encourage client referrals and translate into more customers.
Reflections
Article One
In his article, Weber (2002) analyses the challenges of marketing productivity evaluation in the context of the manufacturing industry. In most cases, marketing budget is high relative to manufacturing costs. This has put pressure on marketers to prove that an organisation’s promotional strategy will maximise shareholder value. Moreover, marketers are required to justify any extra funding included in marketing budget. Thus, new standards are required in the measurement of marketing expenditure as well as its productivity in terms of customer, company, and shareholder value.
Weber (2002) observes that cost-cutting approaches, including “down-sizing, outsourcing, and business process reengineering” have reduced management and production costs considerably (p. 705). In contrast, costs associated with sales promotion and product development have been on the rise. As a result, corporate executives pressurise marketing managers to account for every dollar spent on sales promotion. Among the strategies undertaken to improve marketing efficiency and reduce costs include reducing the sales force, terminating expensive promotional activities, and operating few sales offices.
Nevertheless, it is often difficult to measure the financial returns of a promotional tactic or event. The article offers four ways of evaluating marketing productivity, which include Sheth and Sisodia, Srivastava, Shervani, and Fahey, Anderson and Narus, and Path Marketing Analysis (PMA) models (Weber, 2002). The first three models centre on the role of a marketer in creating shareholder value while the fourth approach estimates the potential return from particular promotional activities. The article also discusses the planning process for a marketing budget and its role in ensuring accountability and efficiency in sales promotion. An organisation requires a marketing comptroller to manage sales promotion costs, improve shareholder value, and enhance the efficiency of its promotional activities. The article concludes that marketing budget control brings many benefits to the firm and its shareholders. Thus, new measures are required in the assessment of the efficiency and productivity of marketing activities.
Article Two
Over the recent past, firms have increasingly embraced sales promotion over advertising. Kim (2011) explores the impact of allocating a budget for sales promotion, which is a short-run strategy, compared to advertising. The article demonstrates that, for a long time, the Japanese food industry has allocated a larger budget to sales promotion than advertising. However, evidence indicates that the sales promotion expenditure translates to increased sales volume and reduced profitability because the “effects of gross margin” are often not static (Kim, 2011, p. 93).
The article states that the decision regarding budget allocation to either advertising or sales promotion involves managers from different departments, including “manufacturing, accounting, sales, brand development, and marketing research” (Kim, 2011, p. 94). The strategies for budget allocation may include the percentage-of-sales approach, the objective-and-task procedure, and the competitive-parity method, among others (Kim, 2011). Besides, budget allocation depends on whether a marketing activity is a pull or a push strategy. Sales promotions resemble the push strategy while advertising is comparable to the pull strategy. Advertising often creates a long-term brand for the company while sales and price (discounts) promotions increase sales volumes in the short-run.
Kim (2011) argues that the decision to use either strategy in budget allocation depends on a firm’s corporate culture, its expected benefits, and its decentralisation level. In particular, a firm’s reward system can motivate brand managers to either pursue advertising or sales promotion. The article concludes that a firm’s marketing strategy should focus on both the short-term objective of increasing its sales volume and long-term brand development.
Article Three
A strong brand gives an organisation a competitive advantage in its market. The nature of marketing tools used by a firm has a huge effect on its brand. Rahmani, Mojaveri, and Allahbakhsh, (2012) compare the effects of sales promotion and advertising on brand development. They argue that brand equity increases customer value by differentiating a firm’s product from those of rival companies. This translates to effective marketing through brand loyalty, which, in turn, gives an organisation a competitive edge in its target market (Rahmani, Mojaveri, & Allahbakhsh, 2012).
The article presents a conceptual framework for determining the marketing tools that can generate brand equity. Brand equity is a multi-faceted concept that includes customer loyalty, awareness, and perceived quality, among others. The article establishes that sales promotion relates to perceived quality and customer loyalty while advertising appeals to brand awareness. Advertising focuses on product development in the long-term by increasing brand awareness and thus, improves brand equity. In contrast, price-promotion, which is often a short-term strategy, does not provide a “frequent sale pattern” (Rahmani, Mojaveri, & Allahbakhsh, 2012, p. 69). In this regard, price-promotion does not lead to brand equity. Customers associate advertising with quality products while sales promotion activities are often linked to inferior products. Thus, advertising, unlike sales promotion, has a positive effect on brand equity.
References
Kim, C. (2011). An Exploratory Analysis of Marketing Budget Allocation: Advertising vs. Sales Promotion. The Ritsumeikan Business Review, 2(3), 91-112.
Kotler, P. (2003). Marketing Management: Analysis, Planning, And Control. Englewood Cliffs, New Jersey: Prentice-Hall, Inc.
Kotler, P. & Armstrong, G. (2013). Principles of Marketing. New York: Prentice Hall.
Rahmani, Z., Mojaveri, H. & Allahbakhsh, A. (2012). Review the Impact of Advertising and Sale Promotion on Brand Equity. Journal of Business Studies Quarterly, 4(1), 64-73.
Weber, J. (2002). Managing the marketing budget in a cost-constrained environment. Industrial Marketing Management, 31(2), 705–717.