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Chapter 11
Managing Productivity
And Marketing
Effectiveness
 OBJECTIVES FOR TODAY

 Describe Productivity
 Compute and Interpret partial operational and financial productivity
 Compute and Interpret total Productivity
 Understand the Components of Sales Variance to assess
Marketing Effectiveness
Managing Productivity

Sustaining profitability and maintaining

or improving market share
requires effective marketing activities.

• BENEFITS OF HIGHER
PRODUCTIVITY
Competitive advantages
Higher-than-average returns,
earnings, and
Attainment of Long-term Success
 ONE TWO THREE FOUR

MEASURING PRODUCTIVITY
A productivity measure that
includes all input resources used in
production is a total productivity.

PRODUCTIVITY MEASURES
Partial Productivity
Partial operational
Productivity
productivity
Partial Financial Productivity
Total productivity(financial Productivity)
 ONE TWO THREE FOUR

MEASURING PRODUCTIVITY
Productivity is the ratio of output to input:
Productivity =

A productivity measure is often compared to the

performance of a prior period, another firm, the
industry standard or a benchmark in assessing the
firm’s productivity.
 ONE TWO THREE FOUR

MEASURING PRODUCTIVITY
A measure of productivity can be either an
OPERATIONAL or FINANCIAL
productivity measure:
Operational Productivity =

Financial Productivity =
ONE TWO THREE FOUR

PARTIAL PRODUCTIVITY

It measures the relationship between the

output and one or part of the required input
resources used in producing the output. The
higher the ratio is, the better. It is computed as
follows:
ONE TWO THREE FOUR

PARTIAL OPERATIONAL
PRODUCTIVITY vs.
PARTIAL FINANCIAL PRODUCTIVITY
Partial Operational Productivity Is the
required physical amount of an input
resources to produce one unit output, while a
Partial Financial Productivity is the number
of units or the value of output manufactured
for each peso spent on the input resources.
 ONE TWO
Partial Productivity Measures
Advantages
• It allows managers to focus on the use of
a particular input
• It is easily interpreted by all within the
organization and are easy to use for
assessing productivity of performance of
operating personnel.
• For operational control, the standard for
performance are very often short term,
say productivity ratios of prior batches of
goods, and productivity trends within the
year can therefore be tracked.
THREE FOUR
Disadvantages
• It measures only the relationship between an input
resource and the output; it ignores any effect that
changes in other manufacturing factors have on the
productivity. An Improved Partial productivity
could have been obtained by decreasing the
productivity of one or more other input resources.
• It ignores any effect that changes in other
production factors have on productivity.
• It ignores the effects that changes in the firm’s
operating characteristics have on the productivity of
the input resource.
• An Improved partial productivity does not imply
that the firm or division operates efficiently. No
efficiency standard is Involved in the determination
of partial productivity measures.
 ONE TWO THREE FOUR

TOTAL PRODUCTIVITY
It shows the relationship between the output and the total cost of all input resources used to
produce the output. Hence,

Total Productivity =

Total productivity is a financial productivity measure. It can be either the number of units or the
sale value of the output obtained.

The total productivity of all resources required to manufacture the output is often used in assessing
production operations. Achieving higher productivity by making more units is an important first
step for a successful firm. An investment that generates higher revenue that other investments for
each peso it spends on resources is a good investment.
 ONE TWO THREE FOUR

TOTAL PRODUCTIVITY
Benefits
It measures the combined productivity of all operating
factors. It decreases the possibility of manipulating
some of the manufacturing factors to improve the
productivity measure of other manufacturing factors.
 ONE TWO THREE FOUR

TOTAL PRODUCTIVITY
Limitations
(1) Total productivity is a financial measure and executives at the operational level may have
difficulty linking financial productivity measures to their day-to-day operations. Furthermore,
deterioration in total productivity can result from increased costs of resources that were beyond
the manager’s control or decreased productivity of some of the input resources that were
outside the realm of the manager.
(2) The basis for assessing changes in productivity could vary over time, that year, yearly measures
use different years as the base.
(3) It can ignore the effects of changes in demand for the product, changes in selling prices of the
goods and services and special purchasing and selling arrangements on productivity.
MANAGING MARKETING
EFFECTIVENESS
No entity can gain success without effective
marketing activities that will enable it to
accomplish the following:

(a) Earn the projected operating income

(b) Attain the desired and budgeted market
share
(c) Adapt to market change
MANAGING MARKETING
Actual Sales
EFFECTIVENESS
Budgeted Sales

Sale Variance
Many factors affect marketing
effectiveness. These include changes in Sales Price Sales Volume
Variance Variance
selling prices, sales quantity, product mix,
market size and market share. Variances in
any of these factors affect operating results
Sales Mix Sales Quantity
and can prevent a firm from achieving sits
Variance Variance
short-term performance objectives and
strategic goals.
Market Share Market Size
The difference between the actual sales Variance Variance
revenues of a period and the sales revenues
in the master budget is the sales variance of
the period. The component of sales
variances follow:
Summary of Variance
Analysis to
Assess Marketing
Effectiveness
Total Sales Variance
XX
Total actual sales
XX
Less: Total budgeted sales
XX
(Unfavorable) Favorable
XX
 Sales Price Variance

Formula:

Sales Price
Variance = [Actual selling price per unit – Number of units in the master budget] x Budgeted
Contribution Margin
 Sales Volume Variance

Formula:

Sales Volume
Variance = [Number of Units Sold– Budgeted selling price per unit] x Actual number of
units sold
 Sales Mix Variance

Formula:

[ ]
Sales Mix Budgeted sales Actual total units Budgeted unit
Variance for = Actual Sales
Mix – mix x of all products x contribution
a product Percentage for percentage for sold margin of the
the product the product product
 Sales Quantity Variance

Formula:

[ ]
Sales Mix Budgeted total Budgeted sales Budgeted
Variance for = Actual total
units of all – sales units of x mix percentage x contribution
a product products sold all products of the product margin per unit
of the product
 Market Size Variance

Formula:

[ ]
Market Size Budgeted total Budgeted market Weighted-
Variance = Actual total
units of the – units of the x share x average budgeted
market market contribution
margin per unit
 Market Share Variance

Formula:

[ ]
Market Budgeted Actual total units Weighted-
Share = Actual
market – market x of the industry x average budgeted
Variance share share contribution
margin per unit
Thank you so much
for listening!