Financial Dimensions of Marketing Decisions

257 Pages·2019·3.084 MB·English

by  David W. Stewart

PALGRAVE STUDIES IN
MARKETING, ORGANIZATIONS AND
SOCIETY
Financial
Dimensions
of Marketing
Decisions
David W. Stewart
Palgrave Studies in Marketing, Organizations
and Society
Series Editor
David W. Stewart
College of Business Administration
Loyola Marymount University
Los Angeles, CA, USA
This book series will focus on the broader contributions of marketing to
the firm and to society at large. It takes a focus more consistent with the
original reasons the marketing discipline was founded, the creation of effi-
cient systems through with societies provision themselves and match sup-
ply with the needs of a diverse market. First, it looks at the contribution of
marketing to the firm, or more broadly, to the organization (recognizing
that marketing plays a role in not-for-profit organizations, governments,
and other organization, in addition to for-profit commercial businesses).
Marketing plays a pivotal and unique role in the creation and management
of intangible assets such as brands, customer lists and customer loyalty,
trademarks, copyrights, patents, and specialized knowledge. Second, the
series explores the broader contributions of marketing to the larger society
of which it is a part. The societal effect of the modern firm, largely through
the development of markets, can be seen in the per capita growth of GDP
in Western Europe between 1350 and 1950. During this period, per cap-
ita GDP increased by almost 600%, while remaining virtually unchanged
in China and India during the same period. Marketing has played an
important role in the improvement of the quality of life through increas-
ing the number, nature and variety products and services, the improve-
ment of the quality and convenience of these product and services, and by
making these products and services more readily accessible to larger num-
bers of persons. The series will examine ways in which marketing has been
employed in the service of social welfare—to promote healthy behaviors,
family planning, environmentally friendly behavior, responsible behavior,
and economic development.
More information about this series at
http://www.palgrave.com/gp/series/16292
David W. Stewart
Financial Dimensions
of Marketing
Decisions
David W. Stewart
College of Business Administration
Loyola Marymount University
Los Angeles, CA, USA
ISSN 2661-8613 ISSN 2661-8621 (electronic)
Palgrave Studies in Marketing, Organizations and Society
ISBN 978-3-030-15564-3 ISBN 978-3-030-15565-0 (eBook)
https://doi.org/10.1007/978-3-030-15565-0
Library of Congress Control Number: 2019936177
© The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer
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A
cknowledgments
December 2018
This book, like all books, is the result of an accumulation of experi-
ences. While I take responsibility for the content of the book, I had con-
siderable help in its completion. Of special note is my long association
with the Marketing Accountability Standards Board (MASB), which for
15 years has championed the important and necessary links among mar-
keting, analytics, and finance. Much of the content of this book had its
genesis in my interactions with MASB project teams and attendees at
MASB summits. But for my involvement with MASB, this book would
not have been written.
I owe a special debt of gratitude to Margaret (Meg) Henderson Blair,
with whom I cofounded MASB. Meg was passionate about the need for
managerially relevant, reliable, valid, and precise measurement of market-
ing outcomes. Meg passed away unexpectedly in early 2018, but her leg-
acy and devotion to marketing accountability live on. I knew Meg for over
40 years during which time she was my friend, coauthor, and mentor.
Meg’s thinking permeates the content of this book.
Allen Kuse, Frank Findley, and Tony Pace, all members of the MASB
staff in addition to being quite accomplished marketers and marketing
researchers, also played an important role in influencing the concepts
offered in this book. Neal Bendle, at the Ivy School at Western University,
and Jim Meier, recently retired from his role as Vice President of Marketing
Finance at Miller/Coors, read and provided comments on an early draft of
the book. Hugh Taylor read and provided feedback on early drafts of all
the chapters and contributed examples, developed spreadsheet illustrations
v
vi ACKNOWLEDGMENTS
of key concepts, and generally helped me polish the content of the book.
Patty Biner at Loyola Marymount University tracked down the copyright
permissions required. I thank her for taking on such a thankless task. The
publisher of the book, Palgrave, was very helpful in making my words
become a book.
I also wish to acknowledge my teachers, students, colleagues, and con-
sulting clients who have presented me with interesting questions and
opportunities to interact with and learn about the operations of many
diverse businesses in hundreds of market contexts. This book and my life
have been enriched by these interactions.
I would be remiss if I did not observe that this book was completed
during a sabbatical from Loyola Marymount University and during a visit
at the Leeds University Business School. I am indebted to both institu-
tions for their support.
Finally, I thank my wife of more than 40 years, Lenora, who has sup-
ported my devotion to the hobby for which I am paid.
Leeds, UK David W. Stewart
Praise for Financial Dimensions
of Marketing Decisions
“The next evolution of marketing involves greater linkage of marketing activities
to value creation. Dave does a great job of laying that out for marketers who are
savvy enough to be early adopters.”
—Tony Pace, President and CEO of the Marketing
Accountability Standards Board
“Dave Stewart’s brilliant rendition of this book serves as a marketers’ guide for
making the case for resources to financial decision makers. The powerful content
of measuring brand value and customer value as well as managing risk, real options,
and portfolio of products provides the necessary guidance for the financial decision
makers. A resourceful book at a compelling time!”
—V Kumar, Regents Professor, Richard and Susan Lenny
Distinguished Chair, and Professor of Marketing,
Georgia State University, USA
“Successful marketers must be prepared to justify their expenditures, activities, and
outcomes in terms of their contribution to the financial performance of the firm.
Stewart’s book is an excellent guide for practicing marketing managers and mar-
keting students who wish to increase their value and credibility by translating mar-
keting actions into financial results.”
—Robert W. Palmatier, John C. Narver Chair in Business
Administration and Professor of Marketing,
University of Washington, USA
vii
c
ontents
1 Introduction 1
2 The Financial Imperative of Marketing 7
3 Business Models: How Firms Make Money 33
4 Estimating Cash Flows 49
5 Intermediate Marketing Outcome Measures and Metrics 73
6 Linking Marketing Outcomes to Financial Performance 95
7 Creating and Measuring Brand Value 117
8 Customer Lifetime Value: The Significance of Repeat
Business 143
9 Anticipating the Future: Managing Risk and Real Options 167
10 Managing Portfolios of Products 189
ix
x CONTENTS
11 Marketing Strategy and Financial Performance 209
12 Measurement Beyond the Firm 225
Index 237