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More About This Title Marketing and Finance - Creating Shareholder Value 2e
English
Written for marketing and finance directors, CEOs, and strategists, as well as MBA students, this practical book explains the principles and practice behind rigorous due diligence in marketing. It connects marketing plans and investment to the valuation of the firm and how it can contribute to increasing stakeholder value. Completely revised and updated throughout, the Second Edition features new case examples as well as a completely new first chapter containing the results of new research into risk and marketing strategies amongst Finance Directors and Chief Marketing Officers.
English
Professor Malcolm McDonald was recently cited as one of the top marketing gurus in the world, along with Philip Kotler and Michael Porter and, in a 2006 Times HE piece, he was named as one of the top ten consultants in the UK. He is now Emeritus Professor at Cranfield University School of Management where, until recently, he was Professor of Marketing and Deputy Director. Formerly Marketing Director of Canada Dry, he is Chairman of six companies and works with many of the operating boards of the world’s biggest multinationals on every continent. He is the author of over 40 books, many of which have been translated into several foreign languages and has published hundreds of articles and papers. Malcolm continues to research and teach at Cranfield and other universities around the world, in addition to speaking engagements, visiting lectures, and consultancy work.
Professor Brian D. Smith is a world-recognised expert on competitive strategy in pharmaceutical and medical markets. He is Adjunct Professor at Bocconi SDA and Visiting Research Fellow at the Open University Business School, where his research interests include strategy making and implementation in medical markets. He is the editor of the Journal of Medical Marketing and the author of over 200 books, papers and articles in the field of marketing and competitive strategy. He also runs Pragmedic, a specialist strategy consultancy and works with many of the world’s leading pharma and medtech companies. Brian has over 30 years experience in medical technology and pharmaceutical markets in both R&D and commercial roles. He has been a member of the Chartered Institute of Marketing for over 20 years and is a former International Vice Chair of the Board of Trustees. He currently serves on the committees of two CIM groups, The Levitt Group and the Medical Marketing Group.
Keith Ward studied economics at Cambridge and then qualified as both a chartered accountant and a chartered management accountant. He worked both in the City and abroad as a consultant and held senior management positions in manufacturing and trading companies (the last being as group financial director of Sterling International). In 1981 Keith joined Cranfield School of Management, where he progressed to become Professor of Financial Strategy, as well as being Head of the Finance and Accounting Group and Director of the Research Centre in Competitive Performance. In addition to his academic work, he developed his own international consultancy practice. He then moved to a Visiting Professorial role at the School, while continuing with his research and consultancy interests, until retiring at the end of 2009. He is the author of a number of books including Marketing Finance. He has also published numerous papers and articles, and contributed to several other books, including as editor.
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Foreword by Anne Godfrey, Chief Executive, CIM xi
Foreword by Charles Tilley, Chief Executive, CIMA xiii
Foreword from the First Edition by Sir Michael Perry, GBE xv
A note for busy people: How to get the best out of this book xix
List of figures xxi
List of tables xxv
Part 1 What is Marketing Due Diligence? 1
Chapter 1 The lessons of experience 3
Fast track 3
Introduction 3
Success stories 5
Starbucks: A holistic offer based on insight and culture 5
The Economist: Side stepping in time to the future 6
Yamazaki Mazak: Matching itself to the market 7
Essilor: Growing the pie 8
Failure stories 9
Blockbuster: Left behind 9
Gateway: Playing a zero-sum game 10
Microsoft’s Zune: So what’s better? 11
Nortel: Playing the wrong game 12
Woolworth’s: Failure to focus 13
Seeing a pattern 14
Financial smoke and mirrors 14
Share and share alike 16
Marketing accountability 16
A new approach 18
Chapter 2 A process of Marketing Due Diligence 21
Fast track 21
What is marketing? 22
What is the connection between marketing and shareholder value? 23
What is the Marketing Due Diligence diagnostic process? 25
Explicating the strategy 27
Assessing the risks 29
Assessing shareholder value creation 34
What is the Marketing Due Diligence therapeutic process? 39
Implications of the Marketing Due Diligence process 41
Chapter 3 The implications of implementing Marketing Due Diligence 43
Fast track 43
The linkage to shareholder value 44
The risk and return relationship 45
A focus on absolute returns rather than risk 48
Using probability estimates to adjust for risk 51
Alignment with capital markets 56
Turning Marketing Due Diligence into a financial value 57
Adjusting marketing planning outcomes 57
Placing the adjusted fi nancial return into context 58
Allowing for ‘capital at risk’ 60
Highlighting deficiencies and key risks 62
Implications for users 63
Part 2 The Marketing Due Diligence Diagnostic Process 65
Chapter 4 Assessing market risk 67
Fast track 67
Some important background to what constitutes ‘success’ 68
Short-term success 68
Strategy and tactics 70
The strategic marketing plan 71
Market risk 71
The meaning of ‘product’ and ‘market’ 72
Combining product and market 77
Product/market growth or decline 78
Product and market combined 82
Market risk assessment 86
Conclusion 93
Chapter 5 Assessing share risk 97
Fast track 97
What do we mean by share risk? 98
How do we assess share risk? 100
Assessing target market risk 101
Assessing proposition risk 103
Assessing SWOT risk 106
Assessing uniqueness risk 108
Assessing future risk 110
Assessing other sources of share risk 113
Aggregating and applying share risk 116
Step 1: Explicate the marketing strategy 117
Step 2: Assess the explicated strategy against the sub-components of share risk 117
Step 3: Aggregate the sub-components into an overall assessment of share risk 119
Step 4: Identify the growth component of the strategy 120
Step 5: Moderate the growth component of the strategy to allow for risk 121
Step 6: Allow for complex strategies 122
The outcomes of share risk assessment 122
Chapter 6 Assessing profit risk 125
Fast track 125
Introduction 126
Profit pool risk 129
Profit sources risk 135
Competitor impact risk 138
Internal gross margin risk 142
Other costs risks 144
Summary 148
What do weak marketing strategies look like? 148
Part 3 The Marketing Due Diligence
Therapeutic Process 151
Chapter 7 The key role of market defi nition and segmentation 153
Fast track 153
Introduction 154
Correct market definition 155
A crucial business discipline, not just a philosophical argument 155
Market mapping 158
Leverage points 162
Market segmentation 165
How customers vary: Needs-based segmentation 170
Some final thoughts 178
Chapter 8 Creating strategies that create shareholder value 181
Fast track 181
Starting from where we are 181
Understanding and managing market risk 183
Understanding and managing product category and market existence risk 183
Understanding and managing sales volume, forecast and pricing risks 189
Understanding and managing share risk 191
Reducing target market risk 192
Reducing proposition risk 192
Reducing SWOT alignment risk 196
Reducing uniqueness risk 198
Reducing future risk 199
Other components of share risk 200
Understanding and managing profit risk 203
Reducing profit pool risk 203
Reducing profit source risk 205
Reducing competitor impact risk 206
Reducing internal gross margin risk 207
Reducing other costs risk 209
Summary and conclusions 210
Chapter 9 Managing high-risk marketing strategies 211
Fast track 211
Allowing for risk 212
Risk equals volatility 213
Controllable versus uncontrollable volatility 214
Using real option analysis 219
Real option example 223
Summary 228
Chapter 10 Fast track: A summary and reminder of the marketing and finance interface 229
The lessons of experience 229
A process of Marketing Due Diligence 229
The implications of implementing Marketing Due Diligence 231
Assessing market risk 232
Assessing share risk 233
Assessing profit risk 234
The key role of market definition and segmentation 236
Creating strategies that create shareholder value 237
Managing high-risk marketing strategies 238
Afterword: What to do now 241
References and further reading 243
Index 245
