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The only sustainable future for marketing - professionalism and accountability by Professor Malcolm McDonald Plekhanov University of Economics 29 th January 2013 This presentation is the copyright of Professor Malcolm McDonald

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The only sustainable future for marketing- professionalism and accountability

by Professor Malcolm McDonald

Plekhanov University of Economics 29th January 2013

This presentation is the copyright of Professor Malcolm McDonald

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Agenda

• What goes wrong without excellent marketing

• The uselessness of Profit and Loss Accounts and Balance Sheets

• In order to become the drivers of corporate strategy, marketers must become more professional and more accountable financially

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Inter Tech’s 5 year performance

Performance (£million) Base Year 1 2 3 4 5

Sales Revenue

- Cost of goods sold

£254

135

£293

152

£318

167

£387

201

£431

224

£454

236

Gross Contribution

- Manufacturing overhead

- Marketing & Sales

- Research & Development

£119

48

18

22

£141

58

23

23

£151

63

24

23

£186

82

26

25

£207

90

27

24

£218

95

28

24

Net Profit £16 £22 £26 £37 £50 £55

Return on Sales (%) 6.3% 7.5% 8.2% 9.6% 11.6% 12.1%

Assets

Assets (% of sales)

£141

56%

£162

55%

£167

53%

£194

50%

£205

48%

£206

45%

Return on Assets (%) 11.3% 13.5% 15.6% 19.1% 24.4% 26.7%

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Performance (£million) Base Year 1 2 3 4 5

Market Growth 18.3% 23.4% 17.6% 34.4% 24.0% 17.9%

InterTech’s 5 Year Market-Based Performance

Customer Retention (%)

New Customers (%)

% Dissatisfied Customers

88.2%

11.7%

13.6%

87.1%

12.9%

14.3%

85.0%

14.9%

16.1%

82.2%

24.1%

17.3%

80.9%

22.5%

18.9%

80.0%

29.2%

19.6%

InterTech Sales Growth (%)

Market Share(%)

12.8%

20.3%

17.4%

19.1%

11.2%

18.4%

27.1%

17.1%

16.5%

16.3%

10.9%

14.9%

Relative Product Quality

Relative Service Quality

Relative New Product Sales

+10%

+0%

+8%

+8%

+0%

+8%

+5%

-20%

+7%

+3%

-3%

+5%

+1%

-5%

+1%

0%

-8%

-4%

Why Market Growth Rates Are Important

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Percentage of market

represented by segment

Percentage of all profits in

total market produced by

segment

Ratio of profit produced by

segment to weight of

segment in total population

Defection rate

Total

Market

Segment

1

Segment

2

Segment

3

Segment

4

Segment

5

Segment

6

27.1

14.7

0.54

15%

18.8

21.8

1.16

28%

18.8

28.5

1.52

30%

11.0

23.0

2.09

35%

9.5

4.9

0.52

17%

14.8

7.1

0.48

20%

100.0

100.0

1.00

23%

Measurement of segment profitability

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Balance sheet

Assets Liabilities

- Land

- Buildings

- Plant

- Vehicles

etc.

- Shares

- Loans

- Overdrafts

etc.

£100 million £100 million

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Balance sheet

Assets Liabilities

£100 million £900 million

- Land

- Buildings

- Plant

- Vehicles

etc.

- Shares

- Loans

- Overdrafts

etc.

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Balance sheet

Assets Liabilities

£900 million £900 million

Goodwill £800m

- Land

- Buildings

- Plant

- Vehicles

- Shares

- Loans

- Overdrafts

etc.

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Intangibles

P and G have paid £31 billion for Gillette, but have bought only £4 billion of tangible assets

- Gillette brand £ 4.0 billion- Duracell brand £ 2.5 billion- Oral B £ 2.0 billion- Braun £ 1.5 billion- Retail and supplier network £10.0 billion- Gillette innovative capability £ 7.0 billion

TOTAL £27.0 billion

(David Haigh, Brand Finance, Marketing Magazine, 1st April 2005)

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Brand

Reputation

Brands affect business value by influencing the behaviour of a wide range of Shell’s

stakeholders, some of which directly impact Shell’s P&L (and hence value)

STAKEHOLDER

PERCEPTION

STAKEHOLDER

BEHAVIOURFINANCIAL

IMPACT

SHAREHOLDER

VALUE

Customers- individuals, businesses

Suppliers / Partners- businesses, energy asset

owners

Employees- current and potential

Shareholders / Bankers- individual and

institutional

Other Stakeholders

- government, media, opinion formers,

academics, public, environmentalists

• Pay price premium

• Buy more

• Lower prices

• Better terms

• Willingness to partner

•(more opportunities)

• Better retention

• Lower salary expectations

• Better qualified candidates

Revenues

Costs

Revenues

Costs

Productivity

Costs

Risk

• Higher PE ratio

• Lower volatility

• Lower borrowing costs

• Better repayment conditions

Influences business and brand value

Indirect influence on value

Tra

dem

ark

s

Brands Increasingly Drive Business Results

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Asset Breakdown for the top 10 countries by Enterprise Value (US$ millions, 2011)

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The historic rift between marketers and the finance department, caused by marketing’s reluctance to be accountable for what they do, is as marked as ever

“Marketing in 3D”

Deloitte

Tense relations between

CFOs and Marketers are

dividing boardrooms over

the value of marketing.

One in three CFOs said

they did not believe

marketing to be crucial

in determining strategy.

“Marketers have constantly hidden

behind a fog of measures that are

based purely on tactical marketing

activity, rather than solid financial

metrics that are relevant to the City”.

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Stories

and Myths

Symbols

Paradigm

Control

Systems

Organisational

Structures

Power

Structures

Rituals

• Cars

• Offices

• Terminology

• Statistics

• Lunch• Research withheld

• Take credit for

others work

• Jargon

• Lack of structure

• Internal focus

• Always in

meetings

• Unaccountable

• Untouchable

• Expensive

• Slippery• Planning

• Delegating

• Deadlines

• Off site

meetings

• 10.00-16.00 hrs• Lunch• Travel• Soft measurement• For self

• Mud doesn‟t stick• Golden child• Quick promotion• No loyalty• Churn• Costs• Experience

The Cultural Web (What senior non marketers believe about

marketers)

Source: „Defining a Marketing Paradigm‟ (Baker, S. 2000)

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The purpose of strategic marketing

The overall purpose of strategic marketing, and its principal focus is the identification and creation of sustainable competitive advantage.

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Definition of marketingMarketing is a process for:

• defining markets

• quantifying the needs of the customer groups (segments) within these markets

• putting together the value propositions to meet these needs, communicating these value propositions to all those people in the organisation responsible for delivering them and getting their buy-in to their role

• playing an appropriate part in delivering these value propositions (usually only communications)

• monitoring the value actually delivered.

For this process to be effective, organisations need to be consumer/

customer-driven

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Asset

Base

Define markets

& understand

value

Determine

value

Proposition

Deliver

value

Monitor

value

Map of the marketing domain

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In capital markets, success is measured in terms of shareholder value added, having taken account

of the risks associated with future strategies, the time value of money and the cost of capital.

17

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Financial Risk and Return

High

Low

Return

HighLow

1

2

3

Risk

Adapted from Professor Keith Ward, Cranfield School of Management

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The route to Sustainable Competitive Advantage (SCA)

Differentiation High

Price

High

Volume

Sales Revenue

Low Business

Risk

Low Financial

Risk

Positive

NPVSCA

Economies

of Scale

Learning

Curve

High Cash

Flows

Gearing

Interest Cover

Working Capital Ratio

Operational LeverageFinancial

OperationsLower

Costs

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Define markets

& understand

value

Determine

value

Proposition

Deliver

value

Monitor

value

Map of the marketing domain

Measurement zone

where metrics

are applied

(Levels 2 & 3)

Strategic zone

where metrics

are defined

(Level 1)

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Asset

Base

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What is Marketing Due Diligence?

Marketing Due

Diligence

Risk Assessment

Market Risk:

Is the market

there?

Strategy risk:

Will we get our

planned share?

Implementation risk:

Will we get our

planned profit?

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Sensitivity to business risk

Marketing Due

Diligence

Risk Assessment

Market Risk:

Is the market

there?

Share risk:

Will we get our

planned share?

Profit risk:

Will we get our

planned profit?

Hig

h g

row

th in

ten

t

Low market share

Lo

w g

row

th in

ten

t

High market share

Moderately sensitive to

market risk

Low sensitivity to

market risk

Highly sensitive

to market risk

Moderately sensitive to

market risk

Hig

h g

row

th in

ten

t

Low competitive intensity

Lo

w g

row

th in

ten

t

High competitive intensity

Moderately sensitive to

share risk

Low sensitivity to

share risk

Highly sensitive to

share risk

Moderately sensitive to

share risk

Hig

h g

row

th in

ten

t

High margins

Lo

w g

row

th in

ten

t

Low margins

Moderately sensitive to

profit risk

Low sensitivity to

profit risk

Highly sensitive to

profit risk

Moderately sensitive to

profit risk

Sensitivity to each source

of risk is dependent

on the source of

growth, current share and

planned margins

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Market Risk Profile• Product Category Existence

• Segment Existence

• Sales Volumes

• Forecast Growth

• Pricing Assumptions

The marketing strategy has a higher probability of success if the product category is well established

If the target segment is well established

If the sales volumes are well supported by evidence

If the forecast growth is in line with historical trends

If the pricing levels are conservative relative to current pricing levels

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Ansoff matrix

Market

Penetration

Product

Development

Market

ExtensionDiversification

Present Newincreasing technological

newness

increasing

market

newness

Present

New

PRODUCTS

MARKETS

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Profit improvement

Productivity improvement Sales growth

Existing assets Change

asset base

Market

penetration

Market

development

Product

development

Increase

usage

Take

competitors’

customers

New

segments

Convert

Non-users

Existing

markets

New

markets

Cost

reduction

Improve

Asset

Utilisation

(eg more/

better

sales calls)

Increase

Price/

Reduce

discounts

Improve

Product/

Customer

mix

Cash and margin focus Growth focus

Investment

•Acquisition

•Joint ventures

•etc

Divestment

Redevelopment

of capital resources

Capital Utilisation focus

Gap analysis summary

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Market Share Risk Profile• Target Market Definition

• Proposition Specification

• SWOT Alignment

• Strategy Uniqueness

• Anticipation of market change

The marketing strategy has a higher probability of success if the target is defined in terms of homogeneous segments and is characterised by utilisable data

If the proposition delivered to each segment is different from that delivered to other segments and addresses the needs which characterised the target segment

If the strengths and weaknesses of the organisation are independently assessed and the choice of target and proposition leverages strengths and minimises weaknesses

If choice of target and proposition is different from that of major competitors

If changes in the external microenvironment and macroenvironment are identified and their implications allowed for

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Listen to how customers talk about category need

Customer View

Advice

• cutting costs

• future technology direction

Help

• design & configuration

• process engineering

• electron commerce

Run

• international network

• disaster recovery

Supplier View

• fast PAD family

• multimedia FRADs

• PIX firewall

• Solutions

• Gigabit Ethernet

• solutions

• high performance

• LAN support

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Understand the different category buyers

Business

perfectionist

Radical thinkers

Profit engineer

Save my

budget

Business

general

Save my

career

Conservative

technocrat

Technical

idealist

Radical

architect

“Reward” “Relief”

Technical

Business

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This is a friend I know…

I know 12m people in the UK as well as I know

Miss Jones

… she is a busy young lady

… she looks after her health and loves fresh

produce

… she drives to the supermarket on a Saturday

morning

… she reads Hello Magazine

… she has a cat

… she doesn‟t pay attention to the price of products

… she does look out for promotions

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STRENGTHS WEAKNESSES

OPPORTUNITIES THREATS

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Strategic marketing planning exercise – SWOT analysis

1

2

3

4

5

You Comp A Comp B Comp C Comp D

Total 100

1

2

3

4

5

1. SEGMENT DESCRIPTION

It should be a specific part of

the business and should be

very important to the

organisation

2. CRITICAL SUCCESS

FACTORS

In other words, how do

customers choose?

3. WEIGHTING

(How important

is each of these

CSFs? Score

out of 100)

1

2

3

4

5

THREATS

5. OPPORTUNITIES / THREATS

What are the few things outside your

direct control that have had, and will

have, an impact on this part of your

business?

6. KEY ISSUES THAT NEED

TO BE ADDRESSED

What are the really key issues

from the SWOT that need to

be addressed?

OP

PO

RT

UN

ITIE

S

4. STRENGTHS / WEAKNESSES

ANALYSIS

How would your customers score you and

each of your main competitors out of 10 on

each of the CSFs?

Multiply the score by the weight.

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Manufacturers

Type B

Dealer Chain

Type B

Independent

Type C

Dealer Chain

Type C

Independent

VARs

Buying

Consortia

Retail

Direct

Response

Other

Type A

Independent

Type A

Dealer Chain

Final Users

Direct

Field Sales5%

47%

7%

0%

1%

15%

7%

5%

7%

4%

0%

0%

Company’s Route to Market

Final Users Route to Market

3%24%

3%

1%

8%

9%

18%

4%

10%

10%

4%

6%

Market map – office equipment

Extracted from the complete map

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Shareholder Value Risk Profile

• Profit Pool

• Profit Sources

• Competitor Impact

• Internal Gross Margin Assumptions

• Assumptions of Other Costs

The marketing strategy has a higher probability of success if the targeted profit pool is high and growing

If the source of new business is growth in the existing profit pool

If the profit impact on competitors is small and distributed

If the internal gross margin assumptions are conservative relative to current products

If assumptions regarding other costs, including marketing support, are higher than existing costs

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Setting expectations of performanceP

GC

P

GC

P

GC

P

GCHigh Low

High

Low

Mkt/Segmentattractiveness

Supplier business strength with

customer

high high/medium

medium low

Streamline

Manage for cash

Streamline

Manage for cash

Strategic

Strategic investment

Strategic

Strategic investment

Status

Pro-active maintenance

Status

Pro-active maintenance

Star

Selective investment

Star

Selective investment

-

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Market attractiveness evaluation

This form illustrates a quantitative approach to evaluating market attractiveness. Each factor is scored, then multiplied by the

percentage weighting and totalled for the overall score. In this example, an overall score of 8.5 out of 10 places this market in the

highly attractive category.

1.

2.

3.

4.

Market Size (£ millions) >

Volume Growth (Units) >

Industry Profitability >

Competitive Intensity

10-7

€250

10%

15%

Low

6-4

€51-250

5-9%

10-15%

Medium

3-0

< €50

< 5%

< 10%

High

Factor Scoring Criteria

Score

5

10

8

6

Weighting

15

40

35

10

Total

Ranking

0.75

4.0

2.8

0.6

8.15

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Profit Risk

• Profit Risk

– The probability that your marketing strategy will create the anticipated value even if you win the anticipated market share from the predicted market size

• Begins by explaining the sources of the growth in value generation

• There are five Profit Risk factors

– Taken from many years of research and incorporating the ideas of game theory based strategy development

– 5 characteristics that differentiate low risk strategies from high risk ones

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Profit Risk

Profitpool

risk

Profitsources

risk

Competitorimpact

risk

Internalgross

marginrisk

Othercost

assumptions risk

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The components of Profit Risk

• Profit pool risk

– The marketing strategy has a higher probability of achieving its aims if the targeted profit pool is large and growing and the marketing strategy’s objectives only require a small share of this pool.

– In such cases, these objectives will not have dramatically negative impacts on existing or potential competitors. Hence the probability of aggressive competitor reaction is much lower.

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The components of Profit Risk

• Sources of profit growth risk

– Marketing strategies have a higher probability of achieving their aims if the source of profit growth is primarily from growth in the total profit pool.

– Where profit growth comes totally from such overall growth in the profit pool, this means that no competitor actually loses existing profits as a direct result of this marketing strategy. Once again therefore the probability of competitor reaction is reduced.

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The components of Profit Risk

• Competitor impact risk

– The marketing strategy has a higher probability of success if any adverse profit impact on competitors is small and evenly distributed.

– The worst case is where the potential impact of the marketing strategy actually threatens the continued existence of a specific competitor. This competitor may well cease to behave in an economically rational way as it fights for survival. This can seriously damage the total profit pool of the market segment or complete industry.

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The components of Profit Risk

• Internal gross margin assumptions risk

– Probabilities of success are increased if gross margin assumptions in the marketing strategy are conservatively based on existing, or otherwise provable, levels.

– This risk tends to be critical when the marketing strategy is based on either ‘new’ products or on selling existing products into a new market segment where pricing and comparative cost information is not readily available.

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The components of Profit Risk

• Other cost assumptions risk

– Probabilities of success are increased if other cost assumptions are conservatively based on existing levels.

– The most common source of error in this area is the assessment of ongoing marketing support that will be needed to maintain the sales revenues that are predicted in the marketing strategy. Often high levels of launch marketing are included but these decline rapidly even where high levels of competitor response should be expected.

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What do most marketing strategies look like in this

area?

1. They do not quantify the total profit pool

2. They do not specifically identify sources of profit growth

3. They do not quantify the impact on key competitors

4. They often assume higher levels of gross margin in the future

5. They frequently include significant improvements in other cost levels, even though the plans may require new product developments and launches

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Market segment objectives: Directional Policy Matrix

High Low

High

Low

Segmentattractiveness

Relative company competitiveness

Selectively

invest

Manage for

cash

Strategic

invest/

build

Pro-actively

maintain

Analysis process

•Attractiveness of each segment (ranked)

•Projected net free cash flow (3/5yrs) -

for each segment

•Key risk factors influencing cash flows

•Risk assessment for each segment

•Risk adjusted future cash flows per segment

•Deduct risk-adjusted cash flows from the capital x cost of capital

for each segment

•Aggregated positive net present value

Strategies to

increase present value

•Increase future cash flows

•Cash flow happens earlier

•Reducing the risk in the cash flows

Critical success factors

No

change

Present position Forecast position in 3 yrs

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Define markets

& understand

value

Determine

value

Proposition

Deliver

value

Monitor

value

Map of the marketing domain

Measurement zone

where metrics

are applied

(Levels 2 & 3)

Strategic zone

where metrics

are defined

(Level 1)

Page 45

Asset

Base

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Overall Marketing Metrics Model

product market segment

ms%

sales£

profit£

corporate rev£

profit£

actions, esp. marketing

metrics on achievement of factor to required level

costs, activity milestones & outputs

Strategy/ achievement

Objectives/results

Plan/action

performance

by product market segment

application of spend

budget funds & time

Resource allocation/ spend

Forecast/profit

corporate performance

turnover,

profit &

shareholder value

budget

£

£

£

£

Intention/

actuality

Business element

Measure-ment

Lead indicators Lag indicators

Required by customers.Relative to competitors

Market growthCustomer acquisition/ retention/ uptrading/ X-selling/ regained

Product/customer mixChannel performance

Cost to achieveResponsibilities

who

who

who

who

what

what

what

what

Positioning of issues in the model

PFs

HFs

CSFs

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Marketing Metrics Model

Business element

Future/ actuality

Corporate

performance

Forecast/results

Corporate

Revenue

Profit

Budget resource

Resource allocation/spend

Budget

Funds

Time

Impact

factors

Strategy/response

Qualifying factors

Productivity factors

Competitive advantage

factors

Marketing &

other actions

Plan/

action

Marketing actions

Other actions

Objectives/outcomes

Market segments

Segment outcomes: sales, GM,

MS

Segmentneeds

Segment attributes

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Define markets

& understand

value

Determine

value

Proposition

Deliver

value

Monitor

value

Map of the marketing domain

Measurement zone

where metrics

are applied

(Levels 2 & 3)

Strategic zone

where metrics

are defined

(Level 1)

Page 48

Asset

Base

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Expenditures to develop marketing assets make sense if the sum of the discounted cash flows they

generate is positive.

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A

B

C

Projected cash

flows from

investing in a

promotion

DCF and NPV

methods

implicitly make

this comparison

Assumed cash

flow resulting

from doing

nothing

Companies

should be

making this

comparisonMore likely

cash flow

resulting from

doing nothing

Note: Most executives compare the cash flow from

promotion against the default scenario of doing nothing

assuming, incorrectly, that the present health of the

company will persist indefinitely if the investment is not

made. For a better assessment of the promotion’s value,

the comparison should be between the projected

discounted cash flow and the more likely scenario of a

decline in performance in the absence of promotional

investment.Figure 10

Adapted from Christensen CM et al, ( 2008 )

£ - 7 million + 2 + 2 + 2 + 2 = £-0.6 million

(1+r) (1+r)² (1+r)³ (1+r)4

£ - 1 million + 2 + 2 + 2 + 2 = £5.4 million

(1+r) (1+r)² (1+r)³ (1+r)4

Page 50

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Over 40 years of research into the link between long run financial success and excellent marketing strategies reveal the following:

Excellent Strategies

• Define markets in terms of needs

• Target needs based segments

• Make a specific offer to each segment

• Leverage their strengths and minimise their weaknesses

• Anticipate the future

• Spell out the financial effectiveness of marketing expenditure

Weak Strategies

• Define markets in terms of products

• Target product categories

• Make similar offers to all segments

• Have little understanding of their strengths and weaknesses

• Plan using historical data

• Make unjustified forecasts of revenue and profits

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Key Elements of World Class Marketing

1. A deep understanding of the market place2. Correct needs-based segmentation and prioritisation3. Segment-specific propositions4. Powerful differentiation, positioning and branding5. Effective strategic marketing planning processes6. Long-term integrated marketing strategies7. A deep understanding of the needs of major customers8. Market/customer-driven organisation structures9. Professionally-qualified marketing people10. Institutionalised creativity and innovation

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APPENDIX 1

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Valuing Key Market SegmentsBackground/Facts

Risk and return are positively correlated, ie. as risk increases, investors require a

higher return.

Risk is measured by the volatility in returns, ie. high risk is the likelihood of either

making a very good return or losing all your money. This can be described as the

quality of returns.

All assets are defined as having future value to the organisation. Hence assets

to be valued include not only tangible assets like plant and machinery, but intangible

assets, such as Key Market Segments.

The present value of future cash flows is the most acceptable method to

value assets including key market segments.

The present value is increased by:

- increasing the future cash flows

- making the future cash flows „happen‟ earlier

- reducing the risk in these cash flows, ie. improving the certainty of these cash flows,

and, hence, reducing the required rate of return.

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Suggested ApproachIdentify your key market segments. It is helpful if they can be classified on a vertical axis (a kind of

thermometer) according to their attractiveness to your company. „Attractiveness‟ usually means the

potential of each for growth in your profits over a period of between 3 and 5 years. (See the attached

matrix)

Based on your current experience and planning horizon that you are confident with, make a projection of

future net free cash in-flows from your segments. It is normal to select a period such as 3 or 5 years.

These calculations will consist of three parts:

revenue forecasts for each year;

cost forecasts for each year;

net free cash flow for each segment for each year.

Identify the key factors that are likely to either increase or decrease these future cash flows.

These factors are likely to be assessed according to the following factors:

the riskiness of the product/market segment relative to its position on the ANSOFF matrix;

the riskiness of the marketing strategies to achieve the revenue and market share;

the riskiness of the forecast profitability (e.g. the cost forecast accuracy ).

Now recalculate the revenues, costs and net free cash flows for each year, having adjusted the figures

using the risks (probabilities) from the above.

Ask your accountant to provide you with the overall SBU cost of capital and capital used in the SBU. This

will not consist only of tangible assets. Thus, £1,000,000 capital at a required shareholder rate of return of

10% would give £100,000 as the minimum return necessary.

Deduct the proportional cost of capital from the free cash flow for each segment for each year.

An aggregate positive net present value indicates that you are creating shareholder value – ie.

achieving overall returns greater than the weighted average cost of capital, having taken

into account the risk associated with future cash flows.

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Invest/

build

?

Maintain

Manage for

cash

Relative company competitiveness

Portfolio analysis - directional policy matrix (DPM)

High

Low

High Low

Segment

attractiveness

No

change

Present position Forecast position in 3 years

NB. Suggested

time period -

3 years

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APPENDIX 2

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The Contents of a Strategic Marketing Plan (<20 pages)

• Mission or Purpose Statement

• Financial Summary

Revenue

Profit

t.0 T+1 T+2 T+3

Products

Ma

rke

ts

Existing New

New

Exis

tin

g

1 2

3 4

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Key (revenue and profit growth)

• from productivity

• by product for market for existing products from existing markets

• from new products in existing markets

• from existing products in new markets

• from new products in new markets

Plus a few words of commentary

Market Overview/Summary

Market definition

Market map showing vol/rev flows from supplier through to

end user, with major decision points highlighted

Where appropriate, provide a future market map

Include commentary/conclusions/implications for the company

At major decision points, include key segments

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SWOT Analyses on Key Segments

• include pictorial representations of the SWOTs, such as bar charts

• highlight major conclusions/issues to be addressed

Portfolio Summaries of the SWOTs

• include Directional Policy Matrix (DPM) summaries of:-

- the attractiveness of the segments over the next 3-5 years

- the current relative competitive position of your company in

each segment

- the planned competitive position of each segment over the

next 3-5 years

Marketing Objectives and Strategies for the next 3-5 years

• include objectives (volume, value, market share, profit, as appropriate)

for the next 3-5 years for each segment as represented by the planned

position of each circle on the DPM

• include strategies (the 4XPs) with costs for each objective

Consolidated Budget for the next 3-5 years

• this will be a consolidation of all the revenues, costs and profits for

the next 3-5 years and should accord with the financial summary

provided earlier

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APPENDIX 3

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Are you getting these essential deliverables from your strategic marketing plan?

Score out of 10

Market structure and segmentation

• Is there a clear and unambiguous definition of the market we are interested in serving?

• Is it clearly mapped, showing product/service flows, volumes/values in total, our shares and critical conclusions for our organisation?

• Are the segments clearly described and quantified? These must be groups of customers with the same or similar needs, not sectors.

• Are the real needs of these segments properly quantified with the relative importance of these needs clearly identified?

Differentiation

• Is there a clear and quantified analysis of how well our company satisfies these needs compared to competitors?

• Are the opportunities and threats clearly identified by segment?

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Score out of 10

Scope· Are all the segments classified according to their relative potential for growth

in profits over the next three years and according to our company’s relative competitive position in each?

· Are the objectives consistent with their position in the portfolio? (volume, value, market share, profit)

· Are the strategies (including products, services and solutions) consistent with the objectives?

· Are the measurement metrics proposed relevant to the objectives and strategies?

· Are the key issues for action for all departments clearly spelled out as key issues to be addressed?

Value capture· Do the objectives and strategies add up to the profit goals required by our

company?

· Does the budget follow on logically and clearly from all the above, or is it merely an add on?

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Marketing Plans 7e

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Available to order now from…www.malcolm-mcdonald.com – insert offer code ATZ6 into the basket

and receive 10% off plus free post and packing!

Take marketing into the boardroom,

and connect marketing strategy to

shareholder value

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[email protected]

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