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Digital Analytics Module 1: Marketing and Finance
Basic Finance for Marketers, calculate CLV and SGR and make decision from those, any article that was not from slides is fair game
Terms in this set (28)
Where are the most important business expenses within a firm?
helps marketing achieve more visibility into their spending and manage their budget and costs while providing value
How does finance help the marketing department?
They are shifting focus from awareness/image to increasing revenue, business cash flow, and customer acquisition
What aspects of a business are marketers efforts and focus being pushed?
profits, costs, feasibility of projects, overall financial performance
What is finance concerned with?
focuses on product development, pricing strategy, distribution channels, promotions, sales targets, brand awareness, publicity
What is marketing concerned with?
communication is key, share the success and collaborate, think alike (think numbers and costs)
What are 3 ways that the relationship between marketing and finance can be improved?
Executives at highest growing companies are strongly aligned on measuring what?
1. Build a full funnel mindset (CMOs should position upper-level activities as indicators for low-level purchases)
2. speak the language of the C-suite (CMOs should translate marketing initiatives into finance terms and outcomes)
To achieve similar results as high-growth companies, CFOs and CMOs should do what?
1. Finance approves the marketing budget
2. finance approves capital expenditure
3. Marketing needs to be able to talk to finance
4. Marketing needs an ally in the boardroom
5. Finance wants to be informed of spend and performance
6. finance may intervene if funds are not invested wisely
What are the 6 reasons marketing should understand finance?
- budgeting marketing for profit is crucial to success (this proves marketing's value bc it shows we aren't just a cost)
- variance is important to understand over time (for example, if one marketing campaign is successful and the other isn't, what caused the difference?)
- How do we know when a capital investment or strategic decision pay off in our marketing efforts? (did XYZ decision bring value?)
Why should marketers be concerned with finance? (from lecture)
Financial Situation analysis
-study of trends, comparative analysis, assessment of present financial strengths/weaknesses
-used in order to study previous trends to determine if we are successful
-comparative analysis involves comparing industry trends
- in this, marketers measure using ratio analysis, profit and contribution analysis, sales and cost analysis
financial evaluation of alternatives
- product introduction (did it work or did it not?)
- delete mature product
- do we expand sales force or do more advertising?
- delete an operation (do we get rid of plant/store/etc?)
- in this, marketers measure sales and cost analysis, break even analysis, profit contribution, cash flow analysis, profit projections, ROI, return on marketing investment, and growth rates
includes forecasting and budgeting
- marketers measure this using sales and cost forecasts, budgets, proforma income statements
marketers measure this using sales and cost forecasts, actuals, and profit performance
cash flow statement
snapshot of your cash flow, shows how changes in balance sheet accounts and income affect cash, typically built from income statement
- if cash flow doesn't move in a positive direction, that is a problem
- cash flow can tell us what is happening in the moment
- incoming cash flows speak to sales volume
- cash paid out to suppliers and employees shows inventory and labor
- purchases show new buildings or permanent assets
- repayments may show long-term borrowings
What are some key facts about cash flow?
serve 2 purposes:
1. listing assets of your company
2. list liabilities of your company
- Major balance sheet changes represent good and bad marketing efforts
- major increases in inventory may be due to a bad campaign
- major increases in intangible assets may be due to brand strength
What are the common types of changes on the balance sheet and their implications?
shows firm's efficiency through profit and loss
What does the income statement do for a firm?
current ratio and quick ratio
What ratios do you use to determine firm's short-term capacity to meet its financial obligations?
current assets divided by current liabilities
(Current Assets - Inventory) / Current Liabilities
What ratio do you use if you need to know if you're liquid over the long term?
Debt Ratio Formula
total debts/ net worth (current liability + short term debt +long term debt); should be greater than 1
fixed cost/(price per unit-variable cost per unit)
What formula do you use if you need to determine if you will breakeven?
- answers the question "How much does that product bring to the table?"
- sales(revenue)- variable costs
Sustainable Growth Rate
the maximum growth rate a firm can achieve without external equity financing while maintaining a constant debt-equity ratio
p=profit margin after taxes
d= dividend payout ratio
L= debt to equity ratio
t= ratio of assets
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