Budgeting Basics and Beyond

5.4. Role of Nonfinancial Managers

The nonfinancial manager must abandon sacred cows to increase profits. For example, a less expensive raw material may be used to result in cost savings without sacrificing product quality. Another example is to lower the quality of a product to save on costs and reduce the selling price to attract more business from price-oriented customers. A company that sells only to a few prestigious accounts that are willing to pay a higher price may produce greater overall profits by lowering the quality and price to get a huge number of price-sensitive accounts. Conversely, the company may keep its high-priced product as is and develop a new second product line of lower prices with a different label to attract the price-conscious consumer.

The marketing manager may increase profits by increasing the selling price, increasing volume, improving quality and service, reducing the time to respond to customer complaints, concentrating on high-demand products, modifying geographic locations, having clean facilities, altering distribution outlets, introducing new products, redesigning packaging, using more attractive styling, discontinuing unprofitable products, increasing personal selling, changing the sales force, and modifying advertising and sales promotion policy.

The marketing manager should determine how much of each sales dollar goes to meeting marketing expenses. He or she should determine the ratio of the change in marketing expenses over the year to ...