A business development strategy is a basis for deploying company resources to create a competitive advantage.
Marketing plays a key role in developing a successful business strategy. Managers and marketers are faced with the task of presenting the development prospects of the company and form a set of marketing programs that can provide the desired result.
To manage a marketing strategy, you need a tool to integrate all planned initiatives. Such a management tool is the Balanced Scorecard (BSC). It involves formalizing the company’s development strategy based on cause and effect relationships.
The objective of the system is to present a marketing strategy in the form of goals and objectives related to KPI performance indicators.
A Balanced Scorecard (BSC)
The idea of the balanced scorecard is that marketing programs should be consistent with the business objectives of KPI, which allows you to quickly monitor the development of the process and manage it.
We list the main reasons why companies should use a balanced scorecard (BSC):
- Get a clear idea of the goals and objectives of a marketing strategy
- Bring a marketing strategy to each responsible employee throughout the organization.
- Optimize the goals of each business unit in accordance with the strategy
- Link marketing strategy goals with long-term business goals and company annual budget
- Record timeline initiatives and align them with financial plans
- Provide monitoring of the implementation of the marketing strategy
The main motive for introducing a balanced scorecard is the desire to link short-term achievements with long-term business goals through an objective set of KPI indicators. Simply put, it is difficult to get from point A to point B in a timely manner if you do not control the speed, actual mileage and fuel consumption in the “car”.
How To Build A Balanced Scorecard?
Four categories determine business development: finance, customers, innovation and internal production processes. To form a model of NGN, you need to go through 5 consecutive steps:
1. The starting point is a strategy
In order to manage something, it is necessary to formulate a strategy. It is not necessary to complicate your goals, we just outline the path that a business must go from the current state to the future, which can be clearly recognized as a success. This approach will highlight what should be measured, and, accordingly, what can be controlled to maximize the result. It is advisable to illustrate your strategy with the help of a tree of goals and a “road map” to achieve them. Such a “map” should include not only the desired results of the marketing strategy but also the main driving forces for their achievement, connected by a causal relationship.
2. KPI indicators
The next step is to identify and assign indicators that best determine performance for each marketing program. Using a balanced scorecard implies a limitation of the KPI used for each event: no more than five indicators. Otherwise, the system may lose controllability.
3. Monitoring KPI
Having chosen a system of indicators, everyday decisions and managerial actions are taken on the basis of these indicators. For marketers, this means that they are optimizing an ongoing marketing strategy based on KPI.
A balanced scorecard implies reporting to all participants in business management. The purpose of the reports is to constantly inform about the effectiveness of the development of the strategy and the prompt adoption of measures necessary to improve the current situation.
5. Integration of KPI with other business management systems
To achieve maximum success, it is necessary to integrate performance indicators into all major management systems, including personnel management systems and financial management systems. This allows you to objectively plan the resources necessary for the business.
KPIs Measure Not only Money
As already noted, the process of implementing MTP – Medium Term Plan begins with the translation of marketing strategies into specific strategic goals. While conventional management systems rely on traditional financial indicators, the balanced indicators system also includes indicators of processes that act as drivers for future results. This means that in addition to financial KPIs, indicators are used to measure customer satisfaction and indicators of processes and innovations.
For example, to assess the customer base, the following indicators are used: market share, brand recognition, customer base growth rate, customer satisfaction, perception of the services provided, customer loyalty. The listed KPIs are also relevant for marketing.
Indicators of operational processes may include a percentage of new product sales, production costs, production cycle time, inventory management, transaction time, quality indicators, etc.
Innovative indicators include KPI, showing the share of sales of new services, ROI, time to market. Again, all of the above indicators are very relevant for a marketing strategy.
Consider a real example of which KPIs can be implemented in a balanced scorecard.
- Share of sales to new customers
- Retention rate
- The number of loyal consumers
- Customer reach
- Repeat sales percentage
- Customer acquisition cost
- Lifetime customer value
- Revenue for each segment
- Revenues for each sales channel
- Post-sales service costs
- The conversion rate for each sales channel
- Customer Service Quality Score
- Number of website visitors
- Site conversion
- Social Coverage
Innovation and Learning:
- Return on investment
- Resource Assessment for Guest Posting
- Viral Content Rating
The result of using a balanced scorecard will become apparent when it’s easy to explain how and why the implemented marketing programs work and make a profit when planning a marketing strategy.