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APPENDIX | CHAPTER 22 657 keeping and computation, when in principle “number of sales working hours” is a more accurate indicator of cost. A far more serious decision is whether to allocate full costs or only direct and traceable costs in evaluating a marketing entity’s performance. The lawn mower company sidestepped this problem by assu<strong>min</strong>g only simple costs that fit with marketing activities, but we cannot avoid the question in real-world analyses of profitability. We distinguish three types of costs: 1. Direct costs—We can assign direct costs directly to the proper marketing entities. Sales commissions are a direct cost in a profitability analysis of sales territories, sales representatives, or customers. Advertising expenditures are a direct cost in a profitability analysis of products to the extent that each advertisement promotes only one product. Other direct costs for specific purposes are sales force salaries and traveling expenses. 2. Traceable common costs—We can assign traceable common costs only indirectly, but on a plausible basis, to the marketing entities. In the example, we analyzed rent this way. 3. Nontraceable common costs—Common costs whose allocation to the marketing entities is highly arbitrary are nontraceable common costs. To allocate “corporate image” expenditures equally to all products would be arbitrary, because all products don’t benefit equally. To allocate them proportionately to the sales of the various products would be arbitrary, because relative product sales reflect many factors besides corporate image making. Other examples are top management salaries, taxes, interest, and other overhead. No one disputes the inclusion of direct costs in marketing cost analysis. There is some controversy about including traceable common costs, which lump together costs that would and would not change with the scale of marketing activity. If the lawn mower company drops garden supply shops, it would probably continue to pay the same rent. Its profits would not rise immediately by the amount of the present loss in selling to garden supply shops ($310). The major controversy is about whether to allocate the nontraceable common costs to the marketing entities. Such allocation is called the full-cost approach, and its advocates argue that all costs must ultimately be imputed in order to deter<strong>min</strong>e true profitability. However, this argument confuses the use of accounting for financial reporting with its use for managerial decision making. Full costing has three major weaknesses: 1. The relative profitability of different marketing entities can shift radically when we replace one arbitrary way to allocate nontraceable common costs by another. 2. The arbitrariness demoralizes managers, who feel their performance is judged adversely. 3. The inclusion of nontraceable common costs could weaken efforts at real cost control. Operating management is most effective in controlling direct costs and traceable common costs. Arbitrary assignments of nontraceable common costs can lead managers to spend their time fighting cost allocations instead of managing controllable costs well. Companies show growing interest in using marketing profitability analysis, or its broader version, activity-based cost accounting (ABC), to quantify the true profitability of different activities. 84 Managers can then reduce the resources required to perform various activities, make the resources more productive, acquire them at lower cost, or raise prices on products that consume heavy amounts of support resources. The contribution of ABC is to refocus management’s attention away from using only labor or material standard costs to allocate full cost, and toward capturing the actual costs of supporting individual products, customers, and other entities.
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Marketing Management 14 PHILIP KOTL
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This book is dedicated to my wife a
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Kevin Lane Keller is widely recogni
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Contents Preface PART 1 CHAPTER 1 x
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Maximizing Customer Lifetime Value
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PART 5 Expanding Total Market Deman
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CHAPTER 16 Managing Retailing, Whol
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Managing the Development Process: C
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even part of the marketing vocabula
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• Interactive Elements—A wealth
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We are indebted to the following co
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Marketing Management
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Defining Marketing for the 21st Cen
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DEFINING MARKETING FOR THE 21ST CEN
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DEFINING MARKETING FOR THE 21ST CEN
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DEFINING MARKETING FOR THE 21ST CEN
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DEFINING MARKETING FOR THE 21ST CEN
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DEFINING MARKETING FOR THE 21ST CEN
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DEFINING MARKETING FOR THE 21ST CEN
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DEFINING MARKETING FOR THE 21ST CEN
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DEFINING MARKETING FOR THE 21ST CEN
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DEFINING MARKETING FOR THE 21ST CEN
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DEFINING MARKETING FOR THE 21ST CEN
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DEFINING MARKETING FOR THE 21ST CEN
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DEFINING MARKETING FOR THE 21ST CEN
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DEFINING MARKETING FOR THE 21ST CEN
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DEFINING MARKETING FOR THE 21ST CEN
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Developing Marketing Strategies and
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DEVELOPING MARKETING STRATEGIES AND
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DEVELOPING MARKETING STRATEGIES AND
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Collecting Information and Forecast
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COLLECTING INFORMATION AND FORECAST
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COLLECTING INFORMATION AND FORECAST
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Conducting Marketing Research Good
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CONDUCTING MARKETING RESEARCH | CHA
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CONDUCTING MARKETING RESEARCH | CHA
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CONDUCTING MARKETING RESEARCH | CHA
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CONDUCTING MARKETING RESEARCH | CHA
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CONDUCTING MARKETING RESEARCH | CHA
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CONDUCTING MARKETING RESEARCH | CHA
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Creating Long-term Loyalty Relation
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CREATING LONG-TERM LOYALTY RELATION
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CREATING LONG-TERM LOYALTY RELATION
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CREATING LONG-TERM LOYALTY RELATION
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CREATING LONG-TERM LOYALTY RELATION
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CREATING LONG-TERM LOYALTY RELATION
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CREATING LONG-TERM LOYALTY RELATION
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CREATING LONG-TERM LOYALTY RELATION
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CREATING LONG-TERM LOYALTY RELATION
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CREATING LONG-TERM LOYALTY RELATION
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CREATING LONG-TERM LOYALTY RELATION
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CREATING LONG-TERM LOYALTY RELATION
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CREATING LONG-TERM LOYALTY RELATION
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CREATING LONG-TERM LOYALTY RELATION
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Analyzing Consumer Markets The aim
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ANALYZING CONSUMER MARKETS | CHAPTE
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Analyzing Business Markets Business
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ANALYZING BUSINESS MARKETS | CHAPTE
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Identifying Market Segments and Tar
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IDENTIFYING MARKET SEGMENTS AND TAR
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Creating Brand Equity One of the mo
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Crafting the Brand Positioning No c
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Setting Product Strategy At the hea
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SETTING PRODUCT STRATEGY | CHAPTER
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Designing and Managing Services As
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Developing Pricing Strategies and P
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DEVELOPING PRICING STRATEGIES AND P
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Designing and Managing Integrated M
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Managing Retailing, Wholesaling, an
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Managing Mass Communications: Adver
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MANAGING MASS COMMUNICATIONS | CHAP
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Managing Personal Communications: D
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Introducing New Market Offerings Ne
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Tapping into Global Markets With ev
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- Page 688 and 689: in February. Also, we will create b
- Page 690 and 691: Chapter 4 Your next task is to cons
- Page 692 and 693: • As a start-up company, what com
- Page 694 and 695: Chapter 20 Knowing that the smart p
- Page 696 and 697: Endnotes Chapter 1 1. Michael Learm
- Page 698 and 699: Harvard Business School Press, 2004
- Page 700 and 701: 30. Queena Sook Kim, “Fisher-Pric
- Page 702 and 703: Tabor, “Contributing Factors; Sev
- Page 704 and 705: 29. For an empirical comparison of
- Page 706 and 707: 75. Michael D. Johnson, and Fred Se
- Page 708 and 709: Perspectives in Consumer Behavior (
- Page 710 and 711: Theory and Measurement (New York: J
- Page 712 and 713: 25. Piet Levy, “Reeling in the Hu
- Page 714 and 715: Chapter 8 1. Jonathan Schneider,
- Page 716 and 717: 57. Jerry Harkavy, “Colgate Buyin
- Page 718 and 719: in-depth examination of how brand n
- Page 720 and 721: 79. John Milewicz and Paul Herbig,
- Page 722 and 723: 22. Kerry Capell, “Thinking Simpl
- Page 724 and 725: 29. Theodore Levitt, “Innovative
- Page 726 and 727: Chapter 12 1. John Frank, “Beep!
- Page 728 and 729: Room for Growth in Printer Market,
- Page 730 and 731:
23. W. Earl Sasser, “Match Supply
- Page 732 and 733:
Jaishankar Ganesh, Mark J. Arnold,
- Page 734 and 735:
Cosmetics,” Journal of Economic P
- Page 736 and 737:
72. For an interesting discussion o
- Page 738 and 739:
29. “Nike Says No to Blue-Light S
- Page 740 and 741:
80. Susan Fournier and Lara Lee,
- Page 742 and 743:
43. Ben Paynter, “Happy Hour,”
- Page 744 and 745:
22. Michael R. Solomon, Consumer Be
- Page 746 and 747:
Tribune, May 12, 2007; Avery Johnso
- Page 748 and 749:
Split Cable T.V. Advertising Experi
- Page 750 and 751:
29. Julia Angwin and Tom McGinty,
- Page 752 and 753:
Marketing?” Marketing NPV 3 (2006
- Page 754 and 755:
9. Stefan Wuyts, Shantanu Dutta, an
- Page 756 and 757:
Innovations,” Journal of Marketin
- Page 758 and 759:
89. Jordan Robertson, “How Nike G
- Page 760 and 761:
41. For some research method issues
- Page 762 and 763:
Global Strategies: A Contingency Mo
- Page 764 and 765:
Takes on Coffee Giants Cup by Cup,
- Page 766 and 767:
Metrics: 50+ Metrics Every Executiv
- Page 768 and 769:
Glossary A activity-based cost (ABC
- Page 770 and 771:
customer lifetime value (CLV) the n
- Page 772 and 773:
J jobbers small-scale wholesalers w
- Page 774 and 775:
personal communications channels tw
- Page 776 and 777:
target market the part of the quali
- Page 778 and 779:
Image Credits Chapter 1 page 2: New
- Page 780 and 781:
Free; page 619: Lou Linwei/Alamy Im
- Page 782 and 783:
Index Name Aaker, David A., 203 Aak
- Page 784 and 785:
McCausland, Tom, 7 McDonald, Bob, 6
- Page 786 and 787:
Andersen Consulting, 208, 209 Andro
- Page 788 and 789:
Disney Channel, 44, 178, 179 Disney
- Page 790 and 791:
IKEA, 5, 35, 37, 83, 179-80, 219, 2
- Page 792 and 793:
Nordstrom Rack, 148 North American
- Page 794 and 795:
StubHub, 73, 74, 412 Suave, 306 Sub
- Page 796 and 797:
African Americans, 77, 224 Age in d
- Page 798 and 799:
Channel integration and systems, 41
- Page 800 and 801:
Customer relationship in services,
- Page 802 and 803:
Family of procreation, 154 Farm pro
- Page 804 and 805:
Legal issues in advertising campaig
- Page 806 and 807:
Master brand, 260 Master franchisee
- Page 808 and 809:
Price, selecting final, 402-3 compa
- Page 810 and 811:
Retail sector, 356 Retail store, de
- Page 812:
Telemarketers, 558 Telemarketing, 5
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