Digital marketing header image for MB article.

7 Essential Digital Marketing Tips for Small Business Owners

Audio Version — 7:55

Why is Digital Marketing Important for Small Businesses?

As a business owner, you may have pondered the question, “why is digital marketing important for small businesses?” After all, if you have a storefront, you probably assume that customers should come and buy from you. While that may be the past business model, today’s savvy small business owner needs to leverage digital marketing to take advantage of free to low-cost online tools to help drive traffic to their business.

Digital marketing is important for small businesses because it is low cost and often free. Digital marketing presents a host of tools to allow business owners to connect with customers and potential customers, communicate special offers, and measure their results in real-time, rapidly changing their advertising strategies. It’s not to say that, as a business owner, you should abandon traditional marketing strategies. However, leveraging digital marketing strategies can complement your traditional techniques and often exceed the results you would get with traditional advertising and marketing methods.

I get it; you wear many hats as a small business owner, and trying to figure out the ins and outs of the digital marketing space seems challenging enough. But trust me when I say this is crucial to running any successful business. Digital marketing can be intimidating if you need help to know where to start; for this reason, I have put together a high-level list of 7 digital marketing tips to get you on the right path in your marketing journey and increasing your business revenue.

digital marketing illustration of two people making mobile friendly websiteCreate a Mobile-Friendly Website 

With over 6.6 billion smartphones worldwide and their continued growth, it’s crucial to ensure that you have a website optimized for mobile devices. If you have a non-mobile-friendly site, you may lose out on potential customers using their phones to browse the web and find businesses like yours. 

Mobile users are often in a rush and want to save time trying to figure out how to make an online purchase or fill out an inquiry form on their phone—they’ll move on if they can’t get what they need quickly and easily. Additionally, having a mobile-friendly website can help increase click-through rates (CTRs) because users only need one tap instead of two clicks when they’re browsing using a smartphone versus a desktop computer; this makes it easier for people visiting from their phones since there aren’t any extra steps involved once they land on your site through Google or another search engine listing.

Using various tools makes it easy to check if your site is mobile-friendly. You can use Google’s Mobile-Friendly Test to determine if your site is mobile-friendly; enter the URL, and the tool will tell you how responsive it is.

Optimize Your Local Listings

 

Getting your business listed on Google, Yelp, and other local directories is the next step in optimizing your digital marketing. It is vital to ensure the information about your company is correct (address, phone number, hours of operation).

If there’s one thing I’ve learned from working with small business owners over the years, it’s this: customers love nothing more than seeing a physical address when searching for businesses online! So make sure that if you have an office or store location, it appears prominently in all the places where people are looking for businesses like yours—including Google Maps.

Another great way to get your business in front of people is through local directories. Many are out there, including Yelp, Angie’s List, and many others. The key is to make sure that your business is listed on these sites so that when people search for things like “best day spa near me” or “best dentist in Riverside,” your business will show up!

Leverage Email Marketing to Drive Sales

Email marketing is still one of small businesses’ most effective and inexpensive digital marketing channels. It’s a great way to connect with customers, build relationships and trust, and drive sales.

Email marketing is one of the most effective ways to reach your audience regularly. When you send out emails that are relevant to your customers’ interests—and don’t spam them—you increase the chances that they’ll read it in their inboxes (and learn something) versus deleting it right away because they’re tired of seeing constant ads in their inboxes all day long!

digital marketing social media iconsCreate an Online Presence with Social Media

If you’re a small business owner, social media is likely one of your best digital marketing tools for reaching new customers. It’s free to set up an account on any of the major platforms—Facebook, Instagram, Twitter—and there are many ways you can use these channels to promote your business and engage with customers.

Social media also allows you to connect with other businesses in your industry. If they share similar goals to yours (like growing traffic), then it might make sense for both parties involved to work together on promotional, content, or advertising campaigns. By partnering together, you have the luxury of sharing audiences with the goal of gaining more followers and, ultimately, more customers.

Focus on Customer Experience and Engagement on Social Media

A fundamental way to improve your customer experience is by listening to and responding to your customers promptly. Your social media presence should reflect this and allow for interactions between you or your customer service team and your customers.

An excellent example is Amazon reviews. If someone has an issue with their purchase, they can write about it in a review they leave on the seller’s page on Amazon. Attentive sellers respond with helpful information or an apology if there is an error (like if they sent the wrong product). You can also see how companies like Apple do this—they have been known for responding fast when customers have questions about products or services offered through Apple Stores around the world.

The critical takeaway for deploying a digital marketing strategy of listening to customers through social media is that you can respond quickly—in real-time—to their concerns and work fast to solve their problems. 

Engage in Influencer Marketing

Influencer marketing is partnering with influencers online (or offline) to promote your brand. It’s a great way to build credibility and reach new customers simultaneously, but it can be difficult for small businesses without a track record or a small budget. 

To get started with influencer marketing, establish a presence on social media channels like Facebook and Twitter. You need people who follow those channels for this strategy to work! Then find influencers who are active within your niche and reach out to them by commenting on their posts or asking them questions about what they like about your industry. Once you establish a relationship with the influencer, ask them if they would be interested in collaborating on something related to their interests. Most often, it’s what their social media channel is all about. 

For example, let’s say you operate a day spa business and wish to increase your clientele. You already have a presence on social media and are looking to collaborate with an influencer to help grow your followers and generate new business. Your strategy to partner with a viable influencer is to seek one that frequently posts on health and beauty or meditation and mindfulness topics. However, one word of caution: influencers with hundreds of thousands of followers may cost you more than smaller (micro) influencers. It’s wise to begin with micro-influencers and move up to major influencers as you grow your business.

Use Content Marketing for that Personal Touch with Digital Marketing 

In today’s digital world, there’s no doubt that content marketing is the best way to compensate for the lack of personal touch. Content marketing is one of the most effective ways to build trust and authority for your business, attract new customers and keep existing ones happy. It can help you promote your brand and educate customers about products or services they may still need to be aware of (like yours). Content marketing also helps answer customer questions about your product, services, and business.

Final Thoughts on Digital Marketing for Small Businesses

If you’re a small business owner, the world of digital marketing can be overwhelming. There are so many platforms and strategies to try that it’s easy to get overwhelmed or discouraged by all the options. But don’t worry, like riding a bike, you get up, pedal, and if you fall off, you get back up and keep going. Eventually, you’ll get the hang of it and begin to see the results of all your efforts.

You don’t need to be an expert at everything immediately; start with one thing at a time, whether building an email list or setting up Facebook ads for your store. Don’t be afraid of failure or making mistakes along the way; those experiences will only strengthen you in the long run as long as you keep moving forward with new ideas and strategies until something finally sticks (and even then, keep experimenting!).

Digital marketing is an excellent way for small businesses to reach customers and grow their businesses. However, it can be challenging to do well. Creating a successful digital marketing strategy that works for your business takes time, patience, and dedication. These seven tips will help guide you on your journey toward becoming an expert in this area!

Image of a man and woman communication

What is Communication? Communication Defined, and its Three Fundamental Qualities

Audio Version — 7:55

What is Communication?

Some may argue that communication occurs between all living creatures on Earth. Pet owners will testify that their dogs and cats “speak” with them and amongst each other. My point is not that your pets don’t communicate with you, but that the topic of animal and insect communication is beyond the scope of this article. In this context, I will concentrate on human communication. The sharing of information between two people and the three fundamental qualities that make it unique to humans.

Communication is a complex process. It is often difficult to determine when and where a communication encounter begins and where it ends. Think about the last time you verbally spoke with someone. Who started the conversation? Who ended the conversation? Did the conversation begin with the first utterance of words, or did a nonverbal cue or a visual message printed on a billboard or t-shirt start it? Perhaps it was a subconscious nonverbal reaction to a visual message. Despite what triggered the conversation — verbal, non-verbal, conscious, or unconscious — millions of us continue to engage in back-and-forth exchanges every second of every day.

Definition of Communication

In their book, The Functions of Human Communication: A Theoretical Approach, Frank Dance and Carl E. Larson noted that there are over 126 definitions of communication. After all, communication carries many meanings that range from messages printed on T-shirts, to presidential speeches, to non-verbal types such as body language, and visual or symbolic displays designed to “communicate” or incite emotional responses.

However, to establish a working definition for this article and as a reference for all current and future posts on the website that relate to the subject, I define communication as the process of transmitting and receiving verbal and nonverbal symbols and signs influenced by multiple contexts.

Our working definition exposes three fundamental qualities that form the foundation of communication that make it unique to humans. It is relational, it’s a process, and it’s symbolic. A closer look at each quality is required.

Three Fundamental Qualities of Human Communication

what is communication article — diagram of human communication qualities fundamentals for

It’s Relational

Communication is an act that we do with others rather than something we do to them. Communication depends on a partner’s involvement. Just like two figure skaters working together, communicators must also work together. Prominent figure skating duos must work to adapt to one another’s abilities or skill levels. If the skaters cannot work together and adapt, their figure skating routine suffers, and the results can be devastating. Like the figure skaters, there’s no difference between two people communicating. Both communicators are in a relationship and, to improve their understanding and communication, they must adapt and coordinate their efforts with one another.

Since communication is relationship-based, it is usually incorrect to assume that just one individual is responsible for a relationship. Two people are responsible for the relationship’s success or failure. Consequently, the two people in the relationship are also responsible for communicating effectively. Instead of blaming one another for a poor outcome, it is better to ask: “How did we handle the conversation or situation poorly, and how can we improve it?”

It’s a Process

We tend to view communication as a series of isolated, discrete, individual acts. However, to the contrary, communication is a process and often a complex process. When you communicate, there are many processes occurring simultaneously that influences the communication process. For example, a co-worker approaches you and compliments you on your presentation at the company meeting. They may something like,

“Roger, you did an outstanding job of addressing all the important issues for our department at today’s company meeting. I like how you used personal stories to convey the message.”

A long history of experiences influences the way you interpret the words of your colleague and the manner you respond to them. For example, you may involve thoughts of how others judge your presentations in your past. How you felt about the presentation yourself? How you feel about the colleague complimenting you? Are they sincere or do they have a record of being insincere? These thoughts, paired with other external and internal “noise” factors, play a part in the process of how you communicate your response to your colleague.

The simplified process illustrates that communication is not one act strung together, but a dynamic and fluid concept that requires many processes before the response is uttered. Most of which are done simultaneously and often subconsciously.

It’s Symbolic

The words we use represent people, ideas, and events, allowing us to communicate about them. Thus, the words we speak are mere symbols which we assign meaning to and accept that meaning as a collective group. The symbols are arbitrary. There is no logical reason that the word doors represents what it stands for. Another word, in English, would work perfectly fine for “door” if everyone agreed upon the word.

We must interpret symbols in the same way in order to understand one another. Communication may become conflictual if we do not interpret symbols the same way. The results of conflict can lead to disagreements, separation, or even war. Take, for example, the two major political parties in the United States. Both interpret symbols differently. They believe differently in the symbolism of freedom or individual rights. There may be similarities in meaning between the two political groups on certain ideas, but on others, the meaning can be different, contributing to the acrimonious atmosphere of American politics.

Final Thoughts

We tend to take communication for granted. We assume communication is a linear process that occurs in isolated, discrete acts with another person. Communication is in fact a complex process that considers many variables from a communicators’ history, the receivers’ history, and external factors occurring at the time of communication.

Despite its complexity, communication occurs every moment of every day, both verbally and non-verbally between humans. While there is an argument for communication with animals, what makes human communication unique is its three fundamental characteristics: It is relational, follows a process, and is symbolic.

 

B2B title tags for SEO header image showing SEO with its elements

How to Write B2B Title Tags for SEO that Rank High in the SERPs

Audio Version — 10:21

You would not expect a story when looking up information about how to write effective B2B title tags for SEO. But, as a digital marketer and marketing consultant, I have plenty of stories to share about my experiences in working for or consulting with B2B companies in Southern California. The idea for creating the B2B search engine optimization (SEO) strategy section of the Marketing Binder website comes from over two decades of working with B2B companies on their digital marketing strategies. Although they may think so, many CEOs and business leaders don’t understand digital marketing and even less of SEO practices.

Note: You may also skip the story and read B2B Title Tags for SEO Best Practices by scrolling to the section at the end of this article.

I begin the B2B SEO Best Practices series with a post about writing B2B title tags for SEO. The most important part of any SEO strategy is content, yet the title tag is thus the second most important element for on-page SEO that helps boost rankings. I will reserve discussing content and SEO in a later article.

The SEO Title Tag Challenge

illustration of business man sitting on downward arrowInspiration for this story begins with a B2B client I consulted for in the manufacturing industry. The manufacturing client, called Brad, whose real name I changed, faced a digital marketing challenge as the organization’s CEO. After several decades of business, he jumped on the internet bandwagon with a company website in the early 2000s. At first, the website enjoyed first page ranking on the search engine results pages (SERPs), like Google. However, with the rise of manufacturing competitors in the same market space, my client found his website slipping rank in the SERPs. At first, his product pages slipped to the bottom of the first page, later the second page, and ended up somewhere on the fifth page of Google.

Rather than crank out more content, Brad continued to optimize the existing content weekly. Content is the most important factor to consider for SEO, as I pointed out earlier. Optimizing the same content consistently and frequently is bad for your ranking, though. You should periodically review your content for optimization, but not every week. When optimizing the same content weekly, you are not allowing enough time for the search engines to crawl and index your pages.

Brad was beyond frustrated when his company website fell to page five of the SERPs. So frustrated that he fired his marketing director and web developer. However, the problem did not arise from his marketing department. As it seemed, Brad’s ego obstructed progress. It was his belief that he had the talent to write and that his writing and consistent optimization would help him rank higher.

Brad knew little about search engine optimization. His knowledge of the search engine ranking system made him dangerous enough to contribute to its decline. He refused to budge. This is where I and my marketing consultant firm, Marketing Binder, enter the picture.

A Solution to the Manufacturers Website Ranking Demise

illustration of people optimizing website for B2B title tags for SEOAfter receiving a call from Brad, and learning about his frustrations and how his SERP ranking dropped over time, I ran an SEO audit of his company’s on-page SEO. A quick glance at the website showed me the immediate problem; the company website did not have any effective title tags. In fact, most of his website pages lacked any description as well. I’ll discuss writing effective descriptions in a later post for B2B SEO best practices. For now, the focus is on B2B title tags for SEO.

Brad and I discussed the importance of adding effective title tags to each page. “I already have titles on each page, so I need no more,” he replied. “Just get me back on the first page.” It would take patience and a strategic approach to convince him.

I showed Brad the difference between using a generic title tag and a specific, keyword rich title tag. From my previous client experience, I showed him how we optimized his title tags and made his ranking and inbound leads improve. Still skeptical, I told him, let’s try a title tag on one of his pages that has a healthy amount of content. There would be no charge for my services, making the venture risk-free. With his eyes peering over his glasses, he glanced at me, grumbled momentarily, then agreed to try it out. I wasn’t costing him anything, and he had already lost rank, so why not try it?

The Results of Improving the Title Tags

It is impossible to predict how long it will take to rise to the top of the SERPs. It may take a few weeks to several months. The good news is that Brad began seeing an increase in rankings within a few weeks of making the title tag change. After tweaking other on-page SEO elements, the initial web page we optimized with the title tag climbed to the front of Google within 60 days. In fact, after Brad saw results from his company website, he hired me to help regain the ranking he originally lost on his website.

The moral of this story is: Don’t be Brad. Do not allow your ego to dictate your strategy. One does not become an expert by having little knowledge on a subject. It’s best to leave digital marketing and SEO to the professionals who can produce results. Yet, if you prefer to go at it alone or with your marketing team, I have compiled a list of SEO title tag best practices to get you started. Before I proceed, let me explain what B2B title tags are all about.

What is a B2B Title Tag for SEO?

Writing a B2B title tag for SEO is like writing a title tag for a business-to-consumer (B2C) or direct-to-consumer (D2C) web page. However, there are some best practices a B2B company should follow when writing SEO title tags to improve their overall ranking in the SERPs. Before I discuss the B2B title tags for SEO best practices, let me define what a title tag is in more detail.

A title tag is a code snippet written in HTML that defines the title of your web pages. It is essential to have well-written title tags that describe your website’s content on each page. Your title tag should look like the following example, with the tags on the outside and your page title in the middle.

<title>This is an example page title - Example.com</title>

 

HTML title tag code for SEO article

Sample HTML code with the title tag code visible.

Search engine algorithms use title tags to decide the position and order of their assigned pages when listing them in their results pages. It is for this reason that title tags are critical when creating your B2B SEO strategy.

The <title> element:

  • Must be text only
  • Defines a title in the browser toolbar
  • Adds a title for the page to the browser’s favorites
  • Displays a title in the search results

Challenges Facing B2B Title Tags for SEO

Here’s where the challenge rests with B2B websites; they overlook the essential parts of their web pages by ignoring B2B SEO best practices. For example, as mentioned already, a significant part of SEO is the title tag. The two examples below are from two different B2B manufacturing companies in the Inland Empire (Riverside and Chino) and both failed to address effective title tags.

The first web page title tag belongs to a contract manufacturer for skin care products. The manufacturer’s page title simply says “Manufacturing” followed by the company’s (brand) name. More than 2 billion Google results return for the keyword, “manufacturing.” The chances of their page showing up in the first 100 results are nonexistent.

example title tag for a personal care manufacturer in Riverside

Sample title tag for a B2B personal care manufacturer. Notice the title consist of only the keyword, Manufacturing? This goes against SEO title tag best practices.

 

The other manufacturing website shows the keyword, “products,” followed by the company brand name. I won’t even venture to estimate how many web pages show up for the keyword, “product.” Their site is also unlikely to appear in the first 100 pages for that keyword. They did not include a page description, which is also important for SEO. That’s a whole other subject, so I’ll leave it for another day.

Image of SEO for manufacturer title tag and description.

Title for a B2B manufacturer with a short, generic keyword as the title. Also take note of the missing description.

 

Both manufacturing firms, in my example, could benefit from using SEO best practices on their web pages. In fact, any B2B website that is serious about gaining ranking in the SERPs to stay competitive should follow the B2B Title Tags for SEO Best Practices.

B2B Title Tags for SEO — Best Practice

The following list are tips for creating effective web page titles. While many SEO factors impact a website’s ranking potential and there is never a guarantee of placement on the first page of any SERP, following best practices can boost your chance for success.

The following tips can help you create an effective web page title:

  • Use descriptive words
    Go for a longer, descriptive title (avoid one- or two-word titles). We saw in our example that the manufacturing websites offered a one word title, making it difficult to rank. To better serve their SEO strategy, they should increase the length of their page title.
  • Keep title under 60 characters
    Search engines display about 50-60 characters of your title, so try to keep it around 55 characters, but not over 60 characters. Longer titles can get cut off in search results, which leads to a poor user experience and thus, poor rankings.
  • Short and concise titles
    Ensure your title is short and concise while using only the most important keywords.
  • Place keywords at beginning
    Title tags, beginning with keywords, receive more weight by Google. Thus, begin your title with your keywords.
  • Use two keywords or fewer per title
    Don’t use over two keywords per title. Shorter keywords reduce page title length, deliver a more targeted and easier-to-rank page, and ensure that the page is relevant for the keywords.
  • Place brand name at end of title
    Add your brand name, especially for lesser known brands, at the end of your title, if at all. When separating your keyword title and brand name, use a pipe to separate the two: |.
  • Separate keywords in title with a hyphen
    If you are using multiple keywords in the title, separate them with a hyphen. In the example earlier, our skin care manufacturer intended to use the keywords skincare manufacturing and beauty contract manufacturer with their company name. They would write the title as:
    skincare manufacture – beauty contract manufacturer | Brand Name
  • Avoid using random words
    Don’t use just a string of words in the title, as this might lower the page’s ranking.
  • Avoid special characters
    Some browsers or search engines do not display special characters. It is best practice to use alphanumeric characters for your title.

The nine best practices for writing B2B title tags for SEO may seem like a lot of information for a 60 characters or less title. Best practices, however, make a difference between a website that ranks higher in the SERPs and one that is lost in the search results. You should write your titles so that they are accurate and meaningful in relation to your page content.

Now, conquer the web by writing effective title tags. If you get stuck or have a question, join the forum for B2B SEO Best Practices and ask the community for help.

 

image of people pointing at documents for strategic control article header image

Strategic Control — Marketing Control Tools

Audio Version — 9:18

The final of the four primary marketing control tools is strategic control. Every company should occasionally reevaluate its strategic approach to its marketplace. They need to determine if their overall marketing effectiveness — concerning long-term goals — meets their response to the marketing environment by reviewing their approach. Specifically, the review helps determine the firm’s overall strengths and weaknesses and answers the question, 

“How far is company leadership (or marketing leaders) capable of exploiting emerging marketing opportunities and facing potential market challenges and threats?”

Strategic Control Methods

Marketing professionals use four tools to measure strategic control:

Following are brief descriptions of each strategic control tool.

Marketing Effectiveness Review

The marketing effectiveness review involves a thorough analysis of marketing performance to identify if the firm has an effective-performing marketing department or an ineffective one. (See the table on the Traits of a Company with Excellent Marketing Orientation.)

The table below highlights the standards a company should follow when reviewing for marketing effectiveness. Companies that can successfully claim to follow all standards are considered a highly effective marketing organization.

 

Traits of an Excellent Marketing Company
The organization selects target markets it enjoys greater advantages and leaves or avoids markets where it is intrinsically weak.
All company employees are customer-minded and market-minded.
Marketing, R&D, and manufacturing share a good, collaborative working relationship.
The company shares a positive and effective working relationship between marketing, sales, and customer service.
Company incentives are established and lead to the right behavior.
The firm consistently builds and tracks customer satisfaction and customer loyalty.
The organization manages a value delivery system in partnership with strong suppliers and distributors.
The company demonstrates knowledge and skill in developing and promoting its brand name(s) and image.
The company demonstrates flexibility in meeting customers' differing needs.

The Marketing Audit

The marketing audit is a comprehensive, systematic, independent, and periodic examination of an organization’s or business unit’s marketing environment, objectives, strategies, and activities. Its purpose is to determine problem areas and opportunities then recommend a plan of action to improve its overall marketing performance.

As mentioned earlier, a marketing audit is composed of four components:

  • Comprehensive
  • Systematic
  • Independent
  • Periodic

I will examine each of the four components:

Comprehensive

Marketing audits cover all aspects of significant marketing activities, avoiding focus on smaller troubled areas. For example, in a B2B company with a large sales force, suppose the company experiences a significant turnover rate within the sales department. One attribution to the substantial turnover could be poor training. Suppose you conduct a thorough marketing audit. In that case, it may reveal that poor or weak company products and sales and marketing promotions lead to a frustrated sales force, which is the cause of a higher turnover.

Conducting a comprehensive marketing audit allows key stakeholders to identify the actual source of the problem.

Systematic

The marketing audit is an orderly (systematic) examination of the company’s:

  • Macro and micro marketing environments
  • Marketing objectives and strategies
  • Marketing systems
  • Specific activities

The marketing audit identifies the essential improvements and incorporates them into a corrective action plan with short-term and long-term actionable steps.

Independent

Whenever company representatives evaluate their operations for audit purposes, they introduce bias and lose objectivity. However, employing a third-party consultant — not associated with the firm — brings objectivity and experience in varied industries they can draw upon in their marketing audits. 

Periodic

Typical firm-level behavior is to conduct a marketing audit only after issues arise and not during effective and positive performance times. Rather than wait for problems to arise, companies should conduct ongoing marketing audits when they are in good health and when their marketing systems are failing. Periodically conducting an audit can benefit a company and keep them from falling short in its marketing initiatives.

An effective marketing audit requires an explicit agreement between company officers and the marketing auditor regarding the audit’s objectives, timeframe, and who gets to ask the questions.

The marketing audit’s general rule is:

Don’t rely solely on company managers for data and opinions. Ask customers, dealers, and any other outside stakeholder or group.

Most firms are not fully aware of how their customers and dealers view them, nor do they fully understand the needs of their customers. 

Marketing Excellence Review

The marketing excellence review encompasses three performance categories in regards to their level of marketing excellence:

  • Poor 
  • Good
  • Excellent

Each category identifies a list of traits that a firm practices regarding marketing initiatives. Excellent marketing companies initiate a series of best practices that ensure they have achieved marketing excellence. See the Marketing excellence chart in the article titled, Does Your B2B Company Measure up to Marketing Excellence? 

The Ethical and Social Responsibility Review

An ethical and social responsibility review is undertaken by companies that set higher standards for their overall existence and operations. These types of companies are socially conscious toward their employees, customers, community, and environment.

As part of the ethical and social responsibility review, organizations must examine their marketing policies and practices and determine whether they are ethically and socially valid. In the same way, marketing practices should adhere to societal norms and values; a company’s products, policies, and practices must not negatively impact its customers, stakeholders, and the community.

Some standards used to review the ethical and social responsibility of an organization may include the following list.

  • The company should have a clear set of definitions for the meaning of illegal, immoral, and antisocial activities.
  • The firm actively practices, promotes and communicates its moral principles (company values) while holding its employees responsible for observing the values.
  • A company makes contributions to the social welfare of its employees.
  • The company follows all local, state, and federal laws and regulations that relate to social responsibility.
  •  They are actively engaged in business ethics in the product, price, promotion, and distribution (placement).

Companies that fall short in achieving excellence in their ethics and social review can better determine how to correct their actions to serve their employees, customers, and community. 

Summary

Conducting a strategic control review requires a complete commitment from an organization’s leadership. Leadership should conduct strategic control reviews frequently to see if the organization meets its objectives. If they are not meeting their objectives, they should have a plan to improve their strategic goals.

Marketing professionals have four strategic control methods at their disposal to evaluate the company’s strategic readiness. The methods include:

Each method has its own set of criteria to follow in determining its effectiveness. Companies that regularly engage in strategic control review and conduct marketing audits are market-oriented and better positioned to excel in their respective market environments.

 

B2B website quality ranking article image header of woman discussing web development

22 Factors that Improve Your B2B Website Quality SEO Ranking

Audio Version — 12:31

How do you build a high-quality B2B website according to Google? 

Quality is a subjective concept. The Oxford dictionary defines quality as:

The Standard of something as measured against other things of a similar kind; the degree of excellence of something.

The definition of quality can vary from person to person, and what is quality to one person might not be for another. However, Google apparently has an opinion about what quality means to their search algorithm and how they define whether or not your B2B website can rank high in the search engine results pages (SERPS). Google determines that poor-quality websites are ranked low or not even ranked altogether, while high-quality websites and content receive a higher organic search ranking. 

When Google released its Panda update in February 2011, it shook the internet. Panda was a major algorithm update that penalized low-quality websites by reducing their rankings and rewarding websites with “high-quality” content.  

Google carefully guards the exact ranking signals in their algorithms to prevent people from gaming their system. However, the search engine giant has listed 22 factors that can improve the quality of a website, increasing the chances that quality websites will rank higher on SERPs than those with lower quality content. Keep in mind, though; the factors are just guidance for creating quality B2B websites and content. They are not exact measurements of Google’s algorithm.

22 Factors that Contribute to Developing Quality B2B Websites and Content

Trust

Trust is critical for getting visitors to take action on your website, whether to stay and read your content, make a purchase from your site, or return to your site. ECommerce websites are especially susceptible to building trust and credibility, given they are transactional websites and gather a person’s financial information. 

With so much misinformation and disinformation available across the internet and printed media, you need to be extra vigilant when creating trustworthy content. Do you trust the content you present in your article or blog post? That’s the one question you should ask yourself when assessing your content or website for trust.

Topic Depth

Google is concerned about delivering relevant and valuable content to its readers. An excellent way to tell if an article on your website offers value is to look at its depth. In other words, is your article written by an expert or an enthusiast that knows the subject well. Or is the article written with too few facts or ideas; is the article shallow in nature?

Some B2B firms tend to lean toward the shallow side of content writing. Their business leaders or marketing managers believe that quantity is better than quality. Nothing could be further from the truth. Focus on developing articles with depth that subject matter experts write within your business or by third parties.

Duplicate or Redundant Articles

Google’s algorithm favors websites with original; articles; these websites get recognized as the first site to post the original content. Any other website that copies the content and posts will not rank for that particular article or rank very high in the SERPS. 

Google also looks to see if your site has duplicate content or similar content but slightly different keywords. Google will deem any website with duplicate content or similar content but somewhat different keywords as a low-quality website.

Comfort Disclosing Financial Information

Not all transactional websites are created equal. You have probably visited a few poorly designed websites that looked a bit “shady.” You thought to yourself that there is no way you would input your credit card information to make a purchase on the website. If a website is questionable to you, leaving you reluctant to provide financial information, Google probably sees the same thing and ranks the site as low quality.

If you’re collecting visitors’ financial information to complete a transaction, be sure your website is credible. There’s nothing like arriving at a website to make a purchase to see that they have not updated any content in months; they have broken links and poorly written content.

sketch of man writing notes for B2B website quality ranking SEOError-Free Content

Before the Panda release, writing blogs or content was primarily based on quantity and not quality. Blogging “experts” would state that it was okay to have a few spelling and grammatical errors in your writing, as long as you are consistent with your content postings. A lot has changed since the release of Google’s Panda. Google’s algorithm for quality website content considers such factors as spelling, style, and whether there are factual errors in your content.

If you are not sure about errors in your writing, solicit the help of an editor who can review your content before taking it live. Also, make sure that you fact-check your information because Google will penalize you for articles with factual errors.

Reader Interest Topics

When you arrive at a website, you think that the content is carefully thought out and created with the reader’s interest. Unfortunately, this is not the case with many websites. 

Web admins are looking to drive traffic to their website for several reasons, and most often, it’s to lure the visitor into a page filled with ads or links to click to other websites. That is how these websites generate revenue; with ad clicks. When auditing your website for quality content, ask yourself, “is my content and articles driven by a genuine interest of my audience, or am I just generating fluff content to game the SERPs?” 

Original Content

To Google, a quality website offers original content. As discussed earlier, duplicate content does not help your website rank higher. Google wants to see authentic content and information on your website. Are you offering original reporting, research, or analysis to your visitors?

Page Value Compared to Other Pages

Does your page offer substantial value compared to other pages in the search results? If you are writing about Marketing Control Tools, does your page provide more value than any other page that offers similar information? You may have to compare what other websites have posted about the topic to what you wrote.

Your page may offer a deeper insight into the topic, with interactive elements like a calculator and a downloadable supplemental document or tool, or possibly a marketing control tools forum to give readers a place to discuss the topic. All of the ideas, as mentioned earlier, add value to the user’s overall experience when looking for information on, for example, marketing control tools.

Quality Control

Do you or your marketing content team have a quality control process for reviewing your site’s articles? This concept ties back into what we’ve already discussed above, are you eliminating errors, poor grammar, and spelling. Is your article or content delivering value to your reader versus what other search results are providing?

UnBiased Article

One way to ensure that you offer valuable content is to provide at least two perspectives or sides to your writing. Articles that offer just one view are biased and can lead your site to rank lower than other sites with the same content that articulates opposing sides of the story.

Recognized Authority

Is the website a recognized authority on the written topics? That is, are you writing topics that belong on the website? For example, imagine a B2B website that is a contract manufacturer for personal care products. You should write content about personal care topics. 

Suppose you are writing about topics that are not related to personal care. In that case, Google may not recognize your B2B website as an authority on the subject, thus lowering your search ranking or simply not ranking your website. 

Mass-Produced Content

Some content across the internet is mass-produced or outsourced to a large number of content creators. Thus, the content spreads across an extensive network of websites, and individual web pages do not get the needed attention or care that a well-crafted document on a single website or page receives. The warning here is that your duplicate content is spread all over the internet, reducing the value for readers. Google frowns on this type of content creation behavior.

Content Editing

Is your article or content appropriately edited, or does it appear sloppy and rushed? When it comes to B2B websites and their content, many B2B marketers are concerned with just getting some content on their website, thus editing plays a backseat to their content strategy or is non-existent altogether. 

To ensure that you have a fighting chance for being ranked for a higher quality B2B website, have your articles and content edited by either an in-house editor or outsource it to freelancers like those found on UpWork.com.

Recognized Authoritative Source

Google wants to know if your website is a “go-to” (authoritative) source for information. Do people in your industry or market recognize your B2B website as an authority on the subject matter? For example, if you are a logistics company and regularly post articles and content about business-to-business logistic services, are there other websites that link to your website? Do your customers (and non-customers) recognize you as an authority in logistics? 

There is room for many authoritative websites across all industries. You can become an authority in your industry by posting valuable content to which other websites will want to link.

Comprehensive Topic Description

Does your content or articles present a thorough description of your topics? Again, the idea is that when posting articles on your website, are the articles complete? Do your articles or content offer insights to your readers that similar articles on competing sites in the SERPs do not? 

Are your readers gaining value from visiting your site and reading the articles? Do you provide value to your readers with your writing? Keep that in the back of your mind when you are developing your content.

sktch of man looking through telescope B2B website ranking article imageBeyond Obvious Information

Does your article or content provide insightful information or analysis that is beyond the obvious? 

Can you begin to see the pattern in this list for developing quality B2B websites? Google wants to make sure that content creators create unique and original content that delivers value to their readers.

Page Recommendation

Would you recommend your webpage to a friend or bookmark the page for yourself? The act of sharing or bookmarking a page signifies some value in the content for the reader.

Too Many Ads

Many websites want to drive any traffic to their pages. B2B websites are no different if executed poorly. Google will recognize if an article has too many ads placed within it, causing a significant distraction for the reader. 

Again, Google wants to deliver value and high quality to its readers. Pages with ads that shroud the articles do not signal quality content, but rather the opposite, as Google sees that article as bait for the ads.

Print Expectations

Would you expect to see the web article you are reading published in a credible print publication like a magazine or a book? Let’s face the fact that not everyone is a world-class writer, me included. However, you can tell if an article is suitable for print within a newspaper, magazine, or book over pieces that do not make any grammatical sense or have poor spelling. 

Google is not asking you to become a published author. Again, they want websites to deliver well-written, thought-out articles that provide value.

Avoid Short, Unsubstantial Articles

Google likes long, thought-out articles that offer your readers specifics. As a B2B firm, is your content helping your readers solve challenges to their problems? Is your content delivering valuable insights into your products and how they can help your readers? If you answered no to these questions, you might want to revisit your articles to see where you can improve the ones falling short of delivering valuable insight.

Detailed Web Pages

There’s nothing more frustrating than arriving at a web page to find very little information or detail on the page that is relevant to a search query. When designing your B2B web pages, place a good amount of attention on creating detailed pages with proper navigation and valuable content.

User Complaints

Do your readers or customers complain about your webpage? Are there missing elements, poorly written content, or hard to navigate or find information? Google wants to deliver the best quality to its readers. Poor design and a lack of depth in your site’s content can turn readers away. Make sure that you create a quality B2B website that readers will want to come to, stay, and share with friends.

Conclusion

The days of simply placing anything on your website and spamming with keywords are long gone. Google emphasizes creating quality websites that deliver value to its readers. Yet, google even recognizes that assessing their algorithm for site quality is a difficult task. While it is nice to hit every one of the 22 factors above for creating a quality B2B website, keep in mind that very few websites achieve everything on the list. Instead, focus on developing unique content and delivering value with little to no page distractions, especially distractions from too many ads.

Since Google does not disclose their exact strategy for their search algorithms, they recommend following the 22 factors for developing quality B2B websites. However, Google notes that websites with several low-quality ranking pages can cause the entire website to drop in SERP rankings. The advice here is to make sure that all of your pages are delivering high-quality content.

 

Efficiency control illustration main header image

Efficiency Control — Marketing Control Tools

Audio Version — 9:18

Efficiency Control

illustration of segmentationThe efficiency control portion of the marketing control process measures spending efficiency as it relates to marketing activities. As you may have read in the Profitability Control Analysis article that profitability control concerns itself with where the firm is making or losing money in regards to:

  • Product
  • Territory
  • Customer
  • Segment
  • Trade channel
  • Order size

Efficiency control aims to evaluate and improve the firm’s spending efficiency and the impact of marketing expenditures such as:

  • Sales force
  • Advertising
  • Sales Promotion
  • Distribution

Larger firms sometimes implement a marketing controller role within the controller’s (finance) office to improve marketing efficiency. The marketing controllers may get involved with one or all of the following activities:

  • Examine adherence to profit plans
  • Help prepare a brand managers’ budget
  • Measure promotional efficiency
  • Perform media production costs analysis
  • Evaluate customer and geographic profitability
  • Staff training on the financial impact of marketing decision’s 

How Efficiency Control Improves Marketing

illustration of business man using archery for efficiency control

In essence, efficiency control may improve a marketing department’s activity efficiencies in two ways.

  1. It may improve the ability of various marketing activities to better contribute toward reaching marketing objectives.
  2. It can help reduce waste and marketing expenses.

Let’s take a closer look at the four different efficiency control tools, sales force efficiency, advertising efficiency, sales promotion, and distribution. Each efficiency control has its set of marketing metrics to determine if the marketing initiative meets its goals or falls short.

Measuring Sales Force Efficiency Control

Sales force efficiency analyzes if a particular salesperson is efficient in meeting their goals through a set of predetermined metrics. Some standard sales metrics may include some or all of the following measures:

  • The average number of sales calls per salesperson per day
  • Average time spent on sales calls per contact
  • Average revenue generated per sales call
  • Average costs incurred per sales call
  • Percentage of orders per group of calls (For example, how many orders did sales receive per 50 sales calls?)
  • The number of new customers created during a specific period
  • The number of customers lost during a specific period
  • The sales force costs as a percentage of total sales

Marketing professionals or controllers may deploy various tactics to gather the necessary information to calculate the above metrics. Information gathering tools such as sales reports, internal databases, questionnaires, meeting discussions, and observations may aid in determining metrics for calculations to determine the sales efficiency.

Conducting a sales force efficiency examination based on the metrics mentioned earlier can lead your marketing management team to discover answers to the following questions.

  1. What role does the sales force contribute to generating revenue? Is online marketing playing a higher position, or are your salespeople in the field generating the bulk of the sales?
  2. Which salespeople are more or less efficient in utilizing resources to convert prospects into buyers?
  3. What are some other reasons for poor efficiency within your sales force, assuming there are inefficiencies.
  4. What is some course of action to take to correct and improve the efficiencies?

Measuring Advertising Efficiency

Advertising is perhaps the most costly expense of the marketing budget. Traditional (offline) marketing typically costs more than online marketing. However, both can become expensive over time. Because of its high costs, it’s essential to determine the advertising efficiency of a given campaign or the efficiency of the overall marketing budget.

While online advertising effectiveness is easier to track, offline advertising proves more challenging. While advertisings efforts and costs contributions are complicated to determine, marketing managers can develop systematic qualitative tools to measure:

  • Increased brand awareness
  • Changing attitudes toward a brand
  • Creating brand loyalty

Some standard advertising metrics for determining advertising efficiency may include:

  • Advertising costs per thousand through a specific communication vehicle such as television or online video ads
  • The percent of a target audience that read or viewed a print media or online advertisement
  • Customer opinion on advertising effectiveness
  • The measurement of an audience’s attitude toward an advertised product
  • The number of leads generated by an offline or online ad campaign.
  • Cost-per-lead
  • Cost-per-acquisition

Marketing managers can use the advertising efficiency metrics to measure internal and external benchmarks that determine if an advertising campaign and its communication channels are efficient in reaching its goals. Should the manager discover inefficiencies, some corrective actions they can initiate are to change:

  • The company’s advertising objectives and policies
  • Ad messages
  • Switch communication channels or media type
  • Media schedule or ad frequency
  • the advertising budget
  • Marketing staff training
  • The advertising agency if the company is using one

Depending on what metrics you measure and their results, you may need to modify or add additional corrective actions to your plan.

Measuring Sales Promotion Efficiency

Depending on the organization’s internal structure, the marketing or sales department may monitor sales promotion efficiency. The sales promotion efficiency process measures the impact of the sales promotion efforts on:

  • Sales
  • Profits
  • Competitiveness
  • Consumer Satisfaction

efficiency control illustrationGenerally, sales promotions offer a range of incentives to customers and vendors (dealers) to stimulate sales and product trials. Running an inefficient sales promotion can end up costing the company money and other resources. That is why marketing and sales managers need to measure the cost and impact of each sales promotion tool. 

Sales promotions are applied at three levels typically. They include the:

  • Customer level
  • Dealer level
  • Sales force level

Some standard sales promotion efficiency metrics used to measure sales effectiveness include:

  • The total sales promotion percentage expense to actual sales
  • The cost of samples, coupons, and other tools per unit selling price
  • The number of inquiries or leads generated from a specific sales promotion

By analyzing the costs and contribution of the sales promotion tools, managers can determine which promotional tool, channel, and level are most efficient. Companies can use their efficiency data results to reduce or eliminate underperforming sales promotions or bolster effective promotions. Additionally, sales promotion metric results can help firms design more efficient promotional strategies in terms of:

  • Costs
  • Level of sales promotion
  • Promotional timing
  • And sales promotion strategies at each level:
    • Customer
    • Dealer
    • Sales force

Measuring Distribution Efficiency

Distribution costs for consumer products, electronics, and apparel can be as high as 35% of retail sales prices. Distributors are the middlemen and are part of the value chain in product distribution. A distributors main assets include their:

  • Sales force
  • Transportation means
  • Storage capabilities

With their assets, distributors will try and optimize margins. In other words, the distribution efficiency control tool allows companies to assess the efficiency of their distribution processes. In essence, the distribution efficiency control tool measures how well a company’s distribution system is to achieve its marketing objectives. From time to time, it may be necessary to make changes to distributors or help distributors better understand the company’s goals and see if distributors may accommodate those goals in their processes and costs.

Some typical criteria used to assess the distribution efficiency process include:

  • The percentage of total distribution costs per unit price
  • The share of physical distribution costs per unit price:
    • Warehousing (storage)
    • Inventory
    • Ordering
    • Transportation
    • Communication
    • Fixed business costs
  • Percentage of channel partners’ cost per unit price:
    • Wholesalers
    • Retailers
    • Agents
  • The costs and contributions associated with direct and indirect channels
  • The potential for using online marketing and network marketing channels or by retail chains
  • Evaluating costs of marketing channels as they relate to offered services to the company and consumers

Companies that regularly evaluate their distribution efficiency costs can determine the effectiveness of their distribution channels and partners. Through their analysis, a marketing manager can minimize distribution costs while maximizing or improving profits and its price and earning competitiveness. Additionally, managers can improve customer satisfaction by adjusting to enhance distribution efficiencies through improved costs and quicker product delivery or service.

Conclusion

The four efficiency control areas, sales force, advertising, sales promotion, and distribution, each have a set of metrics. Marketing managers should measure the metrics and understand the various courses of action to take if any control area is functioning inefficiently. Taking swift action and correcting any issues can boost a company’s profit and keep them competitive.

Firms that fail to establish efficiency control metrics and act on inefficiencies may find themselves bleeding resources and ultimately falling behind their competition or shutting their doors altogether.

 

Financial Analysis Calculations

Profitability Control — Marketing Profitability Analysis

Audio Version — 7:56

Marketing Profitability Analysis Defined

Profitability control is a marketing control tool used to perform marketing profitability analysis. The profitability analysis is a systematic and logical process used to analyze profits earned from various marketing activities and marketing channels. Firms show a growing interest in using marketing profitability analysis to quantify the true profitability of varying marketing activities. Gaining insights to true profitability, marketing managers can:

  • Reduce unnecessary resources required to execute different actions.
  • Increase resource productivity.
  • Acquire resources at a reduced cost.
  • Increase prices of products that consume increased amounts of support resources.

Marketing Profitability Analysis Steps

Marketing profitability analysis involves the following steps:

  1. Identifying functional expenses.
  2. Assigning functional expenses to marketing entities.
  3. Preparing a profit-and-loss statement for each marketing entity.

After marketing managers identify functional expenses, assign those expenses to marketing entities and prepare their respective profit-and-loss statements, the marketing professional then needs to determine if corrective action is necessary based on their profitability analysis.

Marketing Profitability Analysis Example

Using the marketing profitability analysis steps is better explained using an example. In our example, suppose you are the marketing director for a mid-sized vitamin (nutraceutical) manufacturer, and you want to determine the profitability of selling your product direct-to-consumer through three types of retail channels: 

  • Health and wellness centers.
  • Retail supermarket chains.
  • Independent pharmacies.

Below is an oversimplified profit-and-loss statement for the vitamin manufacturer that I’ll use for our marketing profitability analysis example.

simple profit and loss statement chart for marketing profitability analysis article

 

Let’s examine the following steps in determining our marketing profitability analysis.

Step 1: Identify Functional Expenses

Functional expenses are costs incurred for a specific product or service. In our example, the functional expenses are those costs incurred for specific marketing activities for each marketing channel.

In our analysis example, assume that the incurred expenses in the profit-and-loss statement are to:

  • sell the vitamin products
  • advertise them
  • pack and ship the product
  • bill and collect funds

Our first task is to measure the total expense for each activity. We can assume that the sales team incurred most of the costs. The rest of the salary expenses went toward the advertising manager, packing and delivery staff, and the in-house accountant. The Functional Expenses chart below demonstrates the salary, rent, and supplies cost breakdown for each activity.

Functional expenses chart

 

The rent, in our example, is divided amongst the four activities. However, because the sales team works outside of the firm, the rent is not allocated to the sales team but divided by space used, among the other three activities. 

Most of the floor space and rented equipment are for the packing and shipping department. The $7,200 allocated to the supplies activity account covers promotional and packing supplies, delivery fuel purchases, and office supplies.

Step 2: Assigning Functional Expenses to Various Marketing Entities

In step two, we measure how much functional expense is associated with selling through the various marketing channels. The table below, Allocating Functional Expenses to Channels, shows the selling effort made for each channel. The number of sales calls per channel, indicated in the sales column, refers to how many times a salesperson called or visited one of the channel locations. The total selling expense for all three channels was $7,425, and the sales team yielded 675 units. Note that a unit in our marketing profitability analysis example refers to one item, for example, one sales call or one advertisement. In our case, the cost per sales call unit to our marketing channels costs $11 per call.

Respectively, we ran 450 ads with a total expense of $5,400, which yielded $12 per advertisement. The cost for packing, shipping, and billing follows the same formula, generating $18 per package to pack and ship and $9 per order to bill and collect.

marketing profitability analysis chart

 

 

Step 3: Preparing a Profit-and-Loss Statement for Each Marketing Entity 

We can prepare the profit-and-loss statement for each channel partner in the final step. In our profit-and-loss statement example below, the health center channel earned 55% of total sales. The channel had the highest cost of goods, yet the highest gross margin as well. After expenses, the health centers channel netted a profit of $9,150 for the firm.

channel partner profit and loss chart

 

 

The total cost for calls to the health centers was the highest of the three channels, yet its advertising costs were half that of the pharmacy channel, bringing in a meager $430 net profit. On the other hand, total sales calls to retail chains were higher than the pharmacy channel, yet the retail chain channel was at a $2,975 loss for the firm. 

Go through the remaining channel partner data below and see where you might identify areas that can help generate more net profit.

Analysis and Corrective Action

On the surface, it may be easy to eliminate the retail chains channel since they showed a loss compared to the two other channels. Yet, eliminating the retail chain channel may be premature or naive at best. Marketing managers need to determine the possible root causes of revenue loss before removing a channel partner. Marketing managers need answers to the following questions before eliminating a channel:

  • What are the factors that buyers buy based on retail outlets (channel partners) versus the brand?
  • Are there any trends that impact the relative importance of the three channels?
  • Are the firm’s marketing strategies consistent across all three channels, or does the company vary the marketing message based on channel partner?
  • Has the firm conducted a market analysis on competitors currently sold in each of the channels?

Marketing managers can use the answers from the above questions to evaluate the following alternatives:

  1. Establish special charges for handling smaller orders.
  2. Provide more promotional assistance to the retail chains and pharmacies.
  3. Increase ad spending for the retail chain channel.
  4. Evaluate the marketing message and make necessary changes to the messaging strategy for the retail and pharmacy channels.
  5. Remove the poor-performing retail units of each channel.
  6. Create an incentive plan for the retail chain channel to improve total sales.
  7. Do nothing.

Conclusion

Marketing profitability is not without its limitations. Depending on how well marketers understand the analysis methods and constraints, the analysis can lead or mislead marketers. Some advocates argue that the full cost must be allocated to marketing entities, while others say that only direct and traceable costs are necessary for evaluating a marketing entity’s performance. 

Regardless of which side of the argument you stand, marketing profitability analysis does not necessarily prove that the best course of action is to eliminate unprofitable marketing entities, like the retail chain channel in our example. The marketing profitability analysis merely indicates the relative profitability of different channels, products, territories, or other marketing entities. It is up to the marketing manager to ask clarifying questions that lead to effective corrective action of their marketing activities.

Financial Analysis Control Tool Image of data charts and money

Financial Analysis Control Tool

Audio Version — 5:15

Financial Analysis Control Tool Explained

The fourth tool for measuring the annual control plan is the financial analysis control tool. This analysis tool looks at the relationship between the expense-to-sales analysis (ratio) and the overall financial framework to analyze where and how the company is making or losing money concerning marketing activities. In other words, it’s an analysis tool used to determine the efficiency of how a firm is using its assets to generate revenue. 

Companies efficient at generating revenue from their assets have a high asset turnover ratio. Whereas the opposite is true for firms that are not efficiently using their assets to generate sales, they have a low asset ratio.

Marketing managers and executives use the financial analysis tool to measure the return rate on their net worth.

The return on net worth is the product of two ratios: its return on assets and its financial leverage. The critical factors in determining the rate of return on net worth include:

    • Profit margin (net profits / net sales)
    • Asset turnover (net sales / total assets)
    • Return on assets (net profits / total assets)
    • Financial leverage (total assets / net worth)

There are two ways a company can improve the return on its net worth. They can:

  1. Increase its ratio of net profits to assets.
  2. Increase the ratio of assets to net worth.

Let’s take a look at an example of the financial analysis tool at work.

Financial Analysis Example

I will use a utility company for the financial analysis example. Utility companies strive to have an asset turnover ratio between 0.25 and 0.5. The higher the asset ratio, the more efficient the firm is in generating revenue or sales from assets. As a side note, utility and manufacturing firms often have a more extensive asset base, which results in a lower asset turnover. On the other hand, retail businesses tend to have small asset bases with a higher sales volume that lends itself to a high asset turnover ratio.

Taking a look at the diagram below — the Financial Model of Return on Net Wort — we can see that the asset turnover for our utility company is 0.5, which is within a normal range for a utility company. However, its profit margin is low at 3.2%, whereas the average profit margin for a utility firm hovers around 9%.

 

Financial Model of Return on Net Worth Formula Diagram

Financial Model of Return on Net Worth graphic chart

 

How to Improve Rate of Return on Net Worth

 

Before I discuss improving performance concerning the low-profit margin and average asset turnover in the utility company example, let’s address how the firm could improve its rate of return on net worth. I’ll examine the net worth first since the rate of return on net worth relates to the firm’s profit margin and asset turnover and the return on assets and financial leverage.

It’s important to note that the return on assets is the product of the profit margin and asset turnover ratio. The rate of return on net worth is the product of the return on assets and financial leverage. See the formula and calculation below for more information.

 If our rate of return of net worth is 2% in our example, then for a utility company, it appears low. To improve its return on net worth, the utility company must do one of two things in this scenario. They must increase their ratio of net profits to assets or increase the proportion of assets to net worth. To achieve their goal, they should analyze their asset composition to determine if it can improve its asset management. Some assets may include:

    • cash
    • accounts receivable
    • inventory
    • plant and equipment

As discussed above, the return on assets is the product of the profit margin and asset turnover ratios. Because the asset turnover, in our example, appears to be in the normal range for utility companies, but the profit margin is low, the marketing executive can improve performance by increasing the:

    1. Profit margin by increasing sales or cutting costs.
    2. Asset turnover by increasing sales or reducing assets (inventory and receivables) held against a certain level of sales.

Financial Analysis Calculations

There are several calculations for arriving at the Rate of Return on Net Worth in the diagram below. Use the Financial Model of Return on Net Worth above as a model for using the formulas below.

Financial Analysis Calculations

 

 

Summary

The financial analysis control tool is simple to use when calculating if a firm efficiently uses its assets to generate sales. A high asset ratio indicates that the company is financially efficient, and a low asset ratio indicates the opposite. The tool helps guide marketing executives who want to improve financial performance concerning sales for their companies. Two ways executives can improve performance. First, they can increase the profit margin by increasing sales through marketing programs or cutting costs to produce the product. Second, they can increase the asset turnover increasing sales volume or reducing assets such as inventory and receivables held against a certain level of sales.

futuristic image of analytics graph for marketing expense to sales analysis article

Marketing Expense-to-Sales Analysis

Audio Version — 5:03

Marketing Expense-To-Sales Analysis Explained

The marketing expense-to-sales analysis is one of four tools in the marketing annual control plan. As discussed in the article, The Marketing Control Process for your Business, the analysis is partly responsible for ensuring that a company reaches its financial goals. The ratio helps monitor marketing expenses, ensuring that a firm does not overspend on marketing to achieve its sales goals.

Many business leaders and marketing advisors tie marketing spending to industry benchmarks. However, the expense-to-sales analysis tool is a marketing control analysis tool and not a benchmarking tool because marketing drives sales and sales do not drive marketing spending.

When determining if a company is overspending on marketing to achieve its sales goal, the key metric to measure is the marketing expense-to-sales ratio. Other metrics a company uses and that make up the marketing to sales metric are:

    • Salesforce-to-sales ratio
    • Advertising-to-sales ratio
    • Sales promotion-to-sales ratio
    • Marketing research-to-sales ratio
    • Sales administration-to-sales ratio
Practical Application Question

Can you think of other possible sales ratios that a company may use to calculate the expense-to-sales ratio?

Marketing Expense-To-Sales Analysis Scenario Example

We’ll take a look at an example of how the marketing sales-to-expense analysis may impact marketing decision-makers.

A fictional manufacturing company’s marketing sales-to-expense ratio is 40 percent. That is, the firm’s marketing expenses are 40 percent of its sales revenue. Five other metrics make up the total marketing expense-to-sales ratio. The ratios are:

    • Salesforce to sales (20 percent)
    • advertising to sales (6 percent)
    • sales promotion to sales (9 percent)
    • marketing research to sales (1 percent)
    • sales administration to sales (4 percent)

A benchmark for each ratio helps marketers monitor fluctuations in expenses. If expenses fall outside of the “normal” range in any of the sales ratios, there could be cause for concern. For example, if costs are rising, the firm may still have good control over expenses, and the occurrence is considered an anomaly or one-off event. On the other hand, the marketing team may have lost control over the expense, and further investigation into its cause is warranted.

To better monitor expense ratios, marketing managers need to monitor each ratios expenses using a control chart. For example, let’s explore the advertising-to-sales ratio for our manufacturing company example.

marketing expense to sales analysis advertising expense chart

 

The advertising-to-sales ratio, as noted in the manufacturing company example earlier, is 6 percent. Taking a look at the control chart for this ratio, we observe expenses fluctuate between the upper limit and lower limits, with an observation that expenses steadily increased beginning in the 8th period. Marketing managers should have noted the unusual pattern and rise in expenses. An investigation into the costs should have occurred before the 14th period when expenses rose beyond the upper limit.

 

Practical Application Question

Can you identify possible reasons why the advertising-to-sales expense ratio may be increasing?

 

Marketing-to-Sales Expense Calculation/Formula

The marketing-to-sales expense ratio, along with the other ratios, is relatively simple to calculate. To calculate, divide the total marketing spending by the total sales revenue and multiply the results by 100 to get a percentage. Exclude any revenue that is not associated with the sales activity. These revenues may include royalty earnings or interest and savings. The same calculation method applies to sales-to-advertising spending and the rest of the marketing expense-to-sales ratio components.

marketing expense to sales ratio formula

 

Example Calculation

For example, if a company’s marketing expense for a particular product is $40,000 and the company generates a total of $100,000 in sales revenue, the marketing expense-to-sales revenue is 40%.

 

Marketing to Sales Ratio: $40,000 / $100,000 (sales revenue) = .4 x 100 = 40%.

 

Summary

Using the marketing-to-expense sales ratio provides marketing managers with financial insights into how their marketing budgets perform in relation to the sales revenue. With lower ratios, the company has a higher profit-earning potential. However, marketers need to monitor the ratios using a control chart with upper and lower limits to ensure that marketing expenses do not get out of control. At the first sign of heightened costs, marketers need to investigate the causes in the rise of marketing spend.

The better the financial data supplied, the better the analysis and ability to decide a marketing campaigns’ effectiveness.

Market Share Analysis Header Image of Man review metrics and data

Market Share Analysis – Annual Plan Control

Audio Version — 6:41

Is Your Company or Product Leading or Trailing the Competition?

The market share analysis is another tool used as part of the marketing annual plan control and closely related to the sales analysis tool. Market share indicates how your company is doing in terms of unit or revenue sales compared to your competition. However, market share is perhaps the most overused and misused marketing metric. 

Experienced marketers downplay the role of market share or ignore it outright as their processes and ways of measuring success have evolved, making market share analysis irrelevant. However, if the metric is used correctly, in context, and for the right purpose — as with all metrics — then market share is a useful tool for short-term use.

Overall Market Share Analysis

Illustrated pie chart - hand drawn.There are several ways of calculating market share. The most common metric is the overall (or total) market share analysis. The overall market share is the percentage of a market in terms of either unit sales or sales revenue. In other words, it’s the company’s total units sold or revenue generated in comparison to the market’s competitors. 

Understanding the total market share helps marketing managers determine their total market growth or decline and helps them gain insights into trends for how customers make competitor selections. 

Organic sales growth (or the total market growth) costs a company less and is more profitable than the firm seeking to achieve growth by capturing competitor shares. However, losses in market share may signal long-term problems that require the firm to make strategic adjustments to its marketing plan. A company with a market share below a predetermined level may not be profitable, thus not a viable business. Also, firms can use shifts in their product market shares as leading indicators of future opportunities or potential competitive challenges. If a product’s market share dips below a specified level, marketers need to look at various scenarios to determine the cause for a drop in sales. Conversely, suppose sales surge, and the firm gains market share. In that case, this could indicate a problem with the competition or other potential scenarios that require closer analysis.

How Overall Market Share is Calculated

Calculating market share is a relatively simple process. However, gathering competitive data may prove arduous without the proper primary or third-party research data. Assuming that you have this data, market share is calculated in two ways, as mentioned earlier: unit sales and sales revenue.

Unit Market Share is the units sold by a firm as a percentage of total market sales. The formula for unit market share is:

Unit Market Share Formula

 

Revenue Market Share reflects the price of sold goods. The formula for calculating revenue market share is:

revenue market share formula

 

Relative Market Share Analysis — A Better Metric

sketch art of percent signUnlike total market share, which examines the whole market, relative market share analysis measures a firm’s market share related to its largest market competitor. Tracking relative market share over time gives you a benchmark and better understanding of what’s happening between you and your largest competitor. Relative market share allows marketing managers to compare relative market positions across different product markets.

A company or product tied for the lead with its largest competitor in the same market has a relative market share of 100-percent. Anything more than 100-percent indicates a market leader, and less than 100-percent shows the firm behind the market leader. The relative market share can help a company better understand its position or product position in the marketplace with more meaning than the total market share.

Relative market share calculation is similar to total market share. Calculated the metric by either the brand’s product units sold or revenue generated. The formula for the relative market share calculation is:

Relative Market Share Formula - Market Share Analysis

 

Market Share Analysis Challenges and Assumptions

Market Share Analysis Assumption Illustration of two men with question mark.While market share, precisely relative market share, is an excellent metric to measure your firm’s or brand’s leadership or lack of in a given market against competitors. It is not without challenges. Conclusions from market share analysis come with several assumptions. 

First, the assumption that external forces affect all companies in the same manner is often without merit. For example, the U.S surgeon general’s notice the harmful effects smoking has on the body depressed total cigarette sales but did not affect all companies equally.

The assumption that a firm’s performance should be judged against all firms’ average performance is not always correct. The best way to evaluate a company’s performance is against that of its closest competitor. 

The assumption that if a new firm enters the industry, then all existing firm’s market share may drop. A decline in market share does not necessarily mean that the company is performing worse than other companies. Share loss depends on what degree the new firm enters the company’s specific markets.

The assumption that a market share decline is deliberately engineered to improve profits. For example, marketing managers may drop unprofitable customers or products to reduce costs by driving up profits.

The final assumption is that market share can fluctuate for many minor reasons. For example, market share is affected by changes in promotional strategies because a massive promotional sale on a given date affects market share. It may also be affected by social and cultural phenomena like a sales spike for Ocean Spray Cran-Raspberry drink when a video went viral, showcasing a man skateboarding and consuming the beverage.

Summary

Market share is undoubtedly a critical metric to measure. However, marketing managers must throw caution to the wind when using the metric. In other words, marketing managers must use the metric correctly, in context, and for the right reason for it to be a useful analytical tool to guide marketing performance. While overall market share provides a high-level view of where the organization or organization’s product falls compared to the competition in the same market, relative market share is a better indicator of whether a firm or product is leading or lagging behind its closest competitor.