Marketing\'s Role in Profitability Role

Marketing's Role In Profitability

Role of Marketing in Impacting Profitability

The need for any company to see themselves as global competitors starts with companies putting their markets and customers at the center of their strategies, and measuring how effectively they are attracting, selling, and serving their prospects and customers. This dynamic of making an entire company aligned with the needs of customers is called being demand-driven. The concept of aligning and synchronizing the many departments, buyers, suppliers, and strategies to the needs of customers is called creating a demand-driven organization. The implications of becoming demand driven have been quantified in many different studies of marketing's impact on an organization's profitability. Of all these studies, the most significant are those by Columbus (2003) which states the unique perspective of looking at the distribution channels a company sells through from the standpoint of assets and liabilities, and measuring the ROI of strategies aimed at attracting, selling to, and servicing clients. This is interesting research to consider in the analysis of how marketing specifically influences the financial strength and growth of a company. In his research, Columbus claims that Microsoft was able to increase sales by 30% throughout France using lead management and escalation for their mid-market ERP applications.

In quantifying the financial impact of marketing on the profitability and long-term financial performance of any company, the processes surrounding order capture, order management, fulfillment, and order tracking are all critical. Askegar and Columbus (2002) extensive analysis of best practices in high tech manufacturers also highlights the integration of order capture, order management, and order fulfillment systems to the broader marketing systems, the higher the ROI on both the marketing and systems investments. Their best practices grid that emerges is one that shows when marketing strategies across industries are synchronized to sense and quickly respond to demand, there is a corresponding jump in the level of gross margins generated, a lower level of Days Sales Outstanding (DSO), and lower levels of Accounts Receivables as customers pay faster when they are more satisfied with the transaction service they receive. These financial results point to the financial strength of companies who become demand-driven and align all their strategies specifically to the needs of their customers, working to create a value chain that senses and responds quickly to changes in customer preferences and requirements. This agility of marketing strategies is only possible when companies become centered not on their own internal processes, but on the needs, preferences, and wants of their customers. Truly becoming demand driven actually exposes to the most critical of financial measures of performance to the influence of customers. Integration of systems is essential for this level of quick response to market demands is necessary, as the research in this paper discusses.

Where marketing's impact on the financial performance of a company becomes very clear is in the selling of customized product and service configurations to customers. The continual shift of companies to embrace customization and tailoring of their products and services to the specific needs of customers offers some of the highest rewards for financial gains. AMR Research (2003) discusses this in the context of unifying the marketing of build-to-order production strategies into the broader value chain of a company, and the resulting significant influence on financial performance. The focus specifically in the build-to-order strategy is in the quote-to-order workflow process that spans both direct and indirect channels of distribution as order capture points, followed by managing orders from a distributed standpoint, measuring the effectiveness of specific advertising and promotion programs on order rates and profits per order. The quote-to-order process also has significant implications for managing inventories and increasing inventory turns specifically. With an optimized inquiry-to-order process it is common to see a factor of 5 or more increase in inventory turns per year, a reduction of 30% or more in Days Sales Outstanding, and an increase in average order size by over 40-60% based on the use of more effective quoting and demand sensing and execution strategies throughout a company. The entire value chain for many companies is dependent on their ability to quickly sense and responds to customized product and service requests. At the intersection of quote-to-order strategies and increased financial performance due to greater efficiencies is the effectiveness of marketing's role in influencing financial results.