‘Value-based marketing: Marketing
strategies for corporate growth and
shareholder value’
by Peter Doyle
John Wiley; 2000; ISBN 0 471 877271; 370pp; hardback; £24.95
The doyen of British marketing
academics has built an important
bridge between marketing and the
boardroom. Will it ‘spark a revolution’
as his American counterpart Philip
Kotler suggests? A revolution is
certainly needed to shake up the
complacency of British top manage-
ment so far as marketing is concerned.
Doyle puts his finger on the paradox:
‘On the one hand, every chief
executive and mission statement puts
marketing at the very top of the agenda
. . . At the same time, marketing
professionals, marketing departments
and marketing education are not highly
regarded . . . One leading consulting
firm called marketing departments ‘‘a
millstone around the organisation’s
neck’’ (p. ix).
Both CEO myopia and a shortage
of marketing professionalism, notably
performance measurement, may be to
blame, but blame solves nothing. Shar-
ing a common language is key, and
Doyle has made a major contribution
to improving dialogue. Accountant-
speak dominates the boardroom, which
implies marketers must learn to express
their plans and activities in that way.
The alternative may be less realistic:
䉷 HENRY STEWART PUBLICATIONS 1350-231X BRAND MANAGEMENT VOL. 8, NO. 6, 463–466 JULY 2001
why should the strong bother to learn
the language of the weak? This critique
will return to these alternatives after
reviewing the path that Doyle has laid
out. But make no mistake: whether
you agree with him or not, every
serious marketer should understand this
‘value-based’ approach to marketing.
Doyle defines success as maximising
shareholder value: ‘That the central
task of management is to maximise
shareholder value is now virtually
unanimously accepted by top managers
in the USA and the UK’ (p. x). This
may overstate things just a bit (there
are other stakeholders), but it estab-
lishes both a goalpost for marketing
and a framework for assessment.
Chapter 2 clarifies the two formula-
tions of ‘shareholder value’. Discounted
cash flow (DCF) is presumably well
known to readers of this Journal,
and the second formulation is the
economic value-added (EVA) approach
developed by Alfred Rapaport and the
consultants Stern Stewart & Company.
Most other major consultants have
similar methodologies under different
brand names. EVA has two stages:
‘economic profit’ is the net profit after
tax less a charge for the capital
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employed times the cost of capi-
tal, ie the effective rate of interest
the business has to pay for capital.
The second stage projects economic
profits into future years. Shareholder
value then is the current capital
employed plus the ‘present value’ of
these economic profit projections. The
theory assumes that the stock market is
a near-perfect instrument for forecast-
ing dividend cash flows. Doyle refers to
this early in passing, but later says: ‘For
a publicly quoted company, the total
return to shareholders in the form of
dividends and share price appreciation
is the natural way to judge the
performance of its management.’ He
says this is true in the long term. ‘But
as a short-run measure of performance
it is often not a good indicator . . . New
measures like economic value added
may give a better measure of economic
profit, but they in no way solve the
problem of providing an indicator of
long-term value creation’ (p. 149). If
we cannot rely on share price changes
as indicators of future cash flows, the
argument may be undermined just a
bit.
If you are still following the argu-
ment, Doyle is saying that marketing
strategies should be compared on the
basis of the long-term net cash flows
discounted back to the present day.
Nothing new about that but, impor-
tantly, the language has changed. The
book deals with the limitations of this
approach, starting with the difficulty
of forecasting with any certainty. On
a personal note, the reviewer recalls
being very impressed on arrival at Lon-
don Business School by a senior col-
league saying he could forecast, with
high 90s accuracy, the market share of
any new product in each of its first ten
years. It turned out that he first had to
464 䉷 HENRY STEWART PUBLICATIONS 1350-231X BRAND MANAGEMENT VOL. 8, NO. 6, 463–466 JULY 2001
be told what the penetration percent-
age for each year was. If only we
knew!
Missing from Doyle’s list is perhaps
the most important limitation: oppor-
tunity foreclosure. He includes options
for growth (ie experiments) which
should be, and are, treated informally
outside shareholder value analysis, but
the issue is broader than that. Many of
the most dramatic innovations occur in
the ‘white space’ outside the tunnel
vision of long-term planning processes.
The need to ground DCF or EVA
forecasts in present-day reality means
that these white-space opportunities
will be missed by the shareholder value
approach.
Chapter 3 restates marketing as a
value driver (‘driving’ and ‘destroying’
are key words in the shareholder value
lexicon). The new definition of
marketing is ‘the management process
that seeks to maximise returns
to shareholders by developing and
implementing strategies to build
relationships of trust with high-value
customers and to create a sustainable
differential advantage’ (p. 70). We can
all be picky about that: what about
not-for-profit organisations, for ex-
ample? Nevertheless this definition
links shareholder value specifically with
some of the key tenets of modern
marketing thinking. For example, ‘the
real returns are made from solving
customers’ problems. We call this
EVC’ (p. 89). EVC is an acronym play
which converts ‘economic value to the
customer’ to ‘emotional value to the
customer’ in consumer marketing.
Chapter 4 moves to marketing’s
ace card, growth. In the boardroom
paradox noted at the beginning of
this review, the failure to recognise
the overriding importance of building

demand to create growth is puz-
zling indeed. Growth is a key link
between marketing and shareholder
value. Doyle lays out this logic impec-
cably, but he misses the downside of
growth, ie growth without substance.
Marketers have long learned to be
wary of gaining growth or market
share without strengthening profitable
repeat purchases. For example, an
analysis of the rise and fall of e-
businesses would have been instruc-
tive.
The next two chapters make up Part
2 of the book: ‘Developing high-value
strategies’. After identifying some of
the inadequacies of the financial orien-
tation, Doyle notes that ‘growth and
profitability depend crucially on the
ability of the firm to satisfy its
customers’ (p. 153). His customer
metrics are market share, brand image
and awareness, customer satisfaction,
retention and acquisition and rank-
ing by key accounts. The other
metrics which make up his assess-
ment of the current position com-
plete the Kaplan and Norton balanced
scorecard, ie financial, the internal
business perspective (percentage of
sales from new products, manufactur-
ing, inventory, quality and technology
management) and innovation/learning.
Much of Part 2 is a reassembly of
conventional strategy and planning
material, such as Porter’s five forces and
segmentation. This overlap may inhibit
use as an MBA textbook. Some of the
recycled material is a bit outmoded.
For example, the advice to enter a
market if it is attractive, defined as ‘one
where the average competitor earns a
return above its cost of capital’ (p. 157),
would have us all rushing into tobacco.
That is qualified later, but this reviewer
was hoping that these widely promoted
䉷 HENRY STEWART PUBLICATIONS 1350-231X BRAND MANAGEMENT VOL. 8, NO. 6, 463–466 JULY 2001
BOOK REVIEWS
ideas would be tested and refined. On
the other hand, marketers and other
senior managers needing an introduc-
tion or refreshment will find the
clarity, orderliness and condensation
immensely valuable.
Part 3 is entitled ‘Implementing
high-value strategies’ and begins
with brands. So central to the
whole marketing paradox, this chapter
deserves to be read much sooner.
Brand valuation is logically key to the
shareholder value approach to market-
ing. So it is perfectly sensible that this
chapter takes a more positive view than
less financially oriented observers.
Shareholder value and brand valuation
have almost identical methodologies; if
you buy one, you should buy the
other. At the least, brand valuation
deserves careful inspection.
After applying the shareholder value
framework to pricing, Doyle moves to
communications. He claims marketers
use sales, share and awareness as criteria
for budget setting and accountants use
incremental short-term profits. In his
view, both are wrong. In practice any
large company requires budget nego-
tiation between marketing and the
accountants, with the result that both
financial and non-financial measures
are considered. Furthermore, most of
these discussions try to take the longer
term into account. Nevertheless, Doyle
is right that shareholder value is a
useful framework, and this view is now
supported by the IPA. Going further to
condemn all other methods of budget
setting as wrong, or at least irrational,
may be too quick. DCF estimation, his
version of shareholder value, has been
around for at least half a century. The
writer used it in the 1960s, and it was
not new then. So taking Doyle’s own
view of marketing as ‘Darwinian’,
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why is the supposedly superior DCF
methodology so rarely used today?
As you might expect, the book
concludes with Internet marketing.
Once again, this is a valuable con-
solidation of contemporary beliefs,
for example, that the Web allows
firms to move from segmentation to
personalisation and conduct simul-
taneous individual dialogues with all
their global consumers. ‘The interac-
tive one-to-one character of the In-
ternet makes building Net brands
different from classic brand building’
(p. 346), and ‘The Internet . . . changes
the whole nature of business. It
destroys the traditional model of busi-
ness that links information to products’
(p. 352), maybe. Experiencing the
medium of the Web is certainly
different from personal interaction or
reading a newspaper or watching
television, but as e-businesses come
back down to earth we are learning not
to overstate the differences. By the
same token, Doyle must be right that
the same shareholder value framework
can be applied to e-marketing.
This is a terrific book and the
reviewer agrees with the many im-
pressive endorsements that it should
be compulsory reading for serious
marketers. Is it radical? No. Does it
supply the ‘intellectual basis’ that the
book cover claims marketing lacks?
Certainly not. Is it new? Conceptually
no, but importantly it supplies lan-
guage which is new to marketers and
should promote boardroom under-
standing. What it does supremely well
is to consolidate contemporary market-
ing thinking with the current account-
466 䉷 HENRY STEWART PUBLICATIONS 1350-231X BRAND MANAGEMENT VOL. 8, NO. 6, 463–466 JULY 2001
ing methods. Importantly it shows how
to use the lingua franca of the
boardroom to formulate, interpret and
assess marketing strategy. Marketers
undoubtedly need to learn this lan-
guage, and nobody sets it out better
than Peter Doyle.
But is accountant-speak the right
language for marketing? In taking this
softer option may we be doing boards
a disservice? You could not teach
astrophysics using only Chaucerian
English. If marketing could be reduced
to money, so be it, but it has more to
do with what is going on in people’s
heads. Neurobiologists would not react
kindly to having to report their
experiments in shareholder value terms
because that is how scientific grant-
giving institutes have to justify them-
selves to HM Treasury.
One may want to understand the
low road but may not want to take
it. The high road, patiently training
boards and accountants to understand
marketing as it really is, may be tough
but, in the long run, it is the one to
take. Fortunately, many accountants are
keen to learn. The alternative is to
accept that these are different worlds.
Some of the wisest boards of directors
the reviewer has ever met simply gave
us marketers the space and resources to
play with. We knew what they wanted;
and they mostly got it. But that was
then, the new century demands that
boards and marketers get their acts
together.
Tim Ambler
Senior Fellow
London Business School
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.