Marketing Efficiency

Marketing Efficiency
    • Marketing efficiency is a measure of market performance. The movement of goods from producers to the ultimate consumers at the lowest possible cost consistent with the provision of service desired by the consumers is termed as efficient marketing.
    a) Shepherd’s Formula
    • Efficiency of supply chain was calculated with the help of the following formula. The higher this ratio, higher would be the efficiency and vice versa. This can be expressed in the following form:
    ESC = [(V/I)-1]
    Where,
    ESC = Index of Efficiency of Supply Chain
    V = Value of goods sold
    I = Total marketing cost
    b) Calkin’s index
    • The Calkin’s index of marketing efficiency is estimated using the following formula.
    Sum of profit or margin
    Marketing efficiency= 1+ ( ---------------------------------- )

    • The lower the value of the index, higher would be the efficiency.
    c) Acharya’s Approach
    • According to Acharya (2003), an ideal measure of marketing efficiency, particularly for comparing the efficiency of alternate markets channels should take into account all of the following:
    a) Total marketing costs (MC)
    b) Net marketing margin (MM)
    c) Prices received by the farmer (FP)
    d) Prices paid by the consumer (RP)
    • Further, the measure should reflect the following relationship between each of these variables and the marketing efficiency.
    i) Higher the (a), the lower the efficiency
    ii) Higher the (b), the lower the efficiency
    iii) Higher the (c), the higher the efficiency
    iv) Higher the (d), the lower the efficiency
    • As there is an exact relationship among four variables, i.e., a+b+c = d, any three of these could be used to arrive at a measure for comparing the marketing efficiency.
    • The following measure is suggested by Acharya,
    ME = FP ÷ (MC + MM)

Last modified: Tuesday, 19 June 2012, 6:05 AM