Using the Balanced Scorecard to Measure the 4P’s

Kaplan and Norton describe the Balanced Scorecard as a strategic management system emphasising that financial and non-financial measures must be part of the information system at all levels. This requires the balanced scorecard to be cascaded down from the highest levels of the organisation to the tactical and operational levels across all activities – including the marketing mix.

This is particularly important for marketing as it has such a huge impact on the overall results of the overarching strategic balanced scorecard. For the balanced scorecard to be effective within marketing, it will need to be interlinked to marketing objectives.

One way to achieve this is to map the balanced scorecard against the marketing mix. If the objective of the balanced scorecard is to provide a framework to translate organisational strategy into operational terms, then the framework should be translated against terms that the operation works toward.

Let’s take the four objectives set out in the original marketing mix and see how these can be related to the overall strategic management system of the balanced scorecard:

Price

The price at which the product or service is sold reflects our ability to recoup costs and make a profit. This feeds directly into the balanced scorecard in terms of financial success. Our pricing strategy must therefore, be clearly linked to the organisations’ financial goals.

Price will also be influenced by how we want to be perceived by our customer. The perception of value-for-money or high quality must be taken into account when developing our prices. This links into the service aspects of the balanced scorecard.

Another question is the price we place on our people. What is the value of our intellectual property? Knowledge management ensures we have the skills and competence to gain competitive advantage. What are we going to pay to retain and attract expertise? The ability to change and improve is based on the skill set to do so, thus linking directly from marketing balanced scorecard to the overall strategic scorecard.

If we are to succeed we will need the processes to support the people. What price do we pay to ensure the correct processes and systems are in place to support our marketing efforts? The costs associated with introducing and developing processes and systems must be outweighed by the benefits they provide to marketing and selling our products and services.

Promotion

There are costs associated with any marketing effort. The objective is to manage the costs to ensure they do not impinge on the financial objectives of the strategic balanced scorecard. Our choice of promotion must be effective whilst also being cost efficient. In short, how do we fund our advertising?

Our service level will be set to meet the needs of our customers. This will be linked to our product or service portfolio. Part of the role of marketing is to promote that service level in a way that gives a positive reflection of how we want to be perceived by our customers. What is our advertising plan?

The promotional effort will require the input of skills and competencies. This raises several questions regarding our human resources: What skills are required? Do we have the skills? How do we develop the skills? And how do we employ those skills? These skills and competencies can then link back to the learning and growth measured through the balanced scorecard.

Processes and systems will need to support promotion including marketing management support systems and business continuity processes. The processes should ensure that the promotional message is managed throughout the product lifecycle. The systems should gather relevant data to target promotions accordingly. This supports the overall business process of marketing to support the balanced scorecard.

Balance Scorecard and 4P's

Balanced Scorecard Applied to the Marketing Mix

Product

Marketing has a direct link to financial growth through the management of its portfolio based on market growth and share. Identification and consideration of its ‘cash cows’ and ‘stars’ will ultimately result in financial efficiency in creating profit and optimising the use of finances to enhance growth.

A review of the portfolio will also establish where and how they meet the service needs of the customer directly impacting upon the perception of service. This leads to a full analysis of customer service and how it can be developed to support organisational goals in line with the balanced scorecard.

We cannot market a product if we do not have the skills and competencies to make and sell them. Product knowledge is an important asset when developing the marketing mix. Knowledge management in this area can give a significant advantage in the marketplace including the ability improve products to achieve competitive differentiation, thus meeting the needs of the balanced scorecard.

The product does not move itself. Having the systems and processes throughout the organisational supply chain can ensure competitive advantage through time to market and cost efficiencies within the chain. Supply chain mapping leads to processes and systems that link activities and share information to create a better product and move it quickly.

Place

Location, location, location. The physical position of our organisation will directly impact on costs including overheads. This includes the geographical location of the functions and business units. Optimising the location of assets and activities can have an effect on the organisational balanced scorecard. This could be through centralisation or relocation of the marketing function.

In terms of service, how well does the current structure of the organisation meet the customers’ requirements? Is marketing positioned correctly within the structure? How is the marketing function structured to service the customer? What changes to the structure will have a positive impact on customer service?

This brings us to the individuals within the marketing function. Where are they based and where do we employ their skills? Are they involved effectively in influencing and directing marketing decisions as well as support others in strategic planning? It is not enough to have the skills and competencies, they need to be employed at the right time in the right place.

Finally, we need the correct processes and systems to deliver the right product or service to the right place. An agile supply chain will ensure customers receive their requirements on time and be able to track their orders: important aspects of customer service in a technologically advanced era. Measurement of business process excellence will reflect directly back to the overarching balanced scorecard.

This matrix could be expanded to include the extended marketing mix.

The balanced scorecard can be a powerful system when applied at the top of an organisation and cascaded down to individual business units and function. The key for marketing is to map the balanced scorecard against their objectives, particularly in relation to the marketing mix.

If you are interested in how to apply the balanced scorecard to your marketing activities, then why not find out more about our CIM Diploma in Professional Marketing qualifications. Speak to one of our student advisors today by emailing enquiries@oxfordpeg.com or calling 01865 515255.

 

2016-12-10T17:15:52+00:00

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