Marketing and brand strategy

1. Marketing and value creation

Rather than only function to plan for and nurture growth, communicating awareness and brand image,
sales and marketing functions are the sole generators of long-term cash flow for an organization.
Marketing needs to understand its responsibility in creating sustainable growth.

2. Buying patterns and brand growth

To understand how marketing can create growth, you need to understand consumer buying patterns.
market share is driven by the size of a brand's customer base. should marketing focus on penetration or
loyalty? The conventional wisdom is that brands must 'differentiate or die'. there is no empirical
evidence that differentiation leads to brand growth or profitability. view is that brand choice is
underpinned by salience. Physical and mental availability are what really matters.

3. How advertising works

a. Major engine of capitalism, driving consumer demand for products.

b. Weak force, which works largely by refreshing existing associations.

1. Marketing and value creation

Article 1: Marketing skills help build profitable growth

Spend less time on communication and more of their time on the levers of growth

Article 2: How shareholder analysis re-defines marketing

Context: Shareholder value analysis and why it is the crucial context for developing any brand strategy

Why are marketers imp?

The case for the necessity of satisfying customers in competitive markets was made very familiar to us by
Adam Smith. Some marketing professionals want to go further, suggesting the firm should maximize
customer satisfaction. Lowering prices and increasing service levels can always increase customer
satisfaction further, but such a policy would be a quick route to bankruptcy.

Justify marketing investments by showing how they increase corporate earnings or return on capital
employed. Cutting, rather than increasing, marketing expenditures will almost always boost short-term
profitability. Because of the lagged effects of most marketing investments, encouraging these
expenditures to be treated as accounting costs is a dead-end for marketers.

Most common criteria for measuring the effectiveness of marketing are increases in sales and
market share. such growth may just as easily decrease, as increase, profits. Sales growth increases profits
only if the operating margin on the additional sales covers the higher costs and investment incurred to
achieve that growth. Chasing profitless growth has been one of the most common causes of corporate
failure.

Other criteria for justifying marketing strategies include brand awareness, consumer attitudes,
repeat buying and ratings of customer satisfaction. Unfortunately, many of these have weak relationships
to sales and almost none to profitability.

Need for change of Lens

Almost universally accept that the primary task of management is to maximize returns to shareholders.

Marketing is the management process that seeks to maximize returns to shareholders by developing
relationships with valued customers and creating a competitive advantage.

What are a company’s marketing assets?

Marketing expenditure adds value when it creates assets that generate future cash flows (FCF) with a
positive net present value (NPV). Four types of marketing asset: Marketing Knowledge, Brands, Customer
Loyalty, Strategic Relationship

Marketing assets treated as costs rather than investments that are depreciated, this then leads to
insufficient spending on developing brands, retaining customers and creating channel partnerships.

Expenditures to develop marketing assets make sense if the sum of the discounted cash flow they
generate is positive.

Modern finance is based on four principles: the importance of cash flow, the time value of money, the
opportunity cost of capital and the concept of net present value.

“Cash is the basis of value it is what is left over for shareholders after all the
bills have been paid. Cash has a time value because a pound today is worth
more than a pound tomorrow. The opportunity cost of capital is the return
investors could obtain if they invested elsewhere in companies of similar risk.
The net present value concept represents the value of an asset as the sum of
the net cash flows discounted by the opportunity cost of capital.”