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Marketing, cost management and management accounting

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Marketing costs are an important component of the cost structures of many organizations. To date, the literature on cost management (CM) has given relatively minor consideration to marketing costs. The related literature on management accounting (MA) also has not focused on the planning or analysis of marketing costs. The marketing literature likewise has not made CM/MA topics an integral part of its debate. The result is minimal integration between several literatures.

The major themes developed in this paper arise from the existence of this minimal integration between the marketing and CM/MA literatures and the gaps arising in the issues addressed in each literature. These major themes include:

1. The marketing and CM/MA literatures contain substantial differences in focus. Traditionally, marketing has emphasized sales volume and sales revenue while the CM/MA literature has emphasized cost and more specifically cost of goods sold. While many decisions facing managers require integration of issues covered in both literatures, there are few published examples of such integration.

2. Marketing has traditionally focused on revenues and the attraction of customers. In recent years, however, the emphasis has been shifting from revenues to profits. Moreover, retention as well as attraction of profitable customers has become a top priority.(1) The analysis of customer profitability is enhanced by an understanding of the behavior and drivers of customer-related revenues and costs.(2)

3. Differences between marketing and manufacturing costs make it difficult to simply import techniques developed for manufacturing costs when analyzing and estimating marketing costs. Two key characteristics that make marketing costs different from manufacturing costs are:

a. Many manufacturing costs are committed in manufacturing infrastructure (e.g., plants and machinery) or in products (e.g., product designs). In contrast, many marketing costs are discretionary even just prior to their incurrence.

b. There is greater flexibility to tailor marketing costs in a...