The Marketing Book 5th Edition

Target

Market

Segment

Marketing

Plan

Performance

Design

Choice

Price

Value

Discounts

Service

Delivery

Credit

Information

Image

Security

Product

Strategy

Pricing

Distribution

and

Service

Advertising

and

Promotion

Sales

Costs

Inventory

Margins

Sales

Debt

Sales

Assets

Expenses

Sales

Expenses

Assets

Budgets

Return

on

Investment

Marketing

Objectives

Buyer

Expectations

Marketing

Mix

Financial

Variables

Profit

Objectives

Marketing-led approach Accounting-led approach

290 The Marketing Book

will usually increase profitability in the short
term because higher margins will offset the
volume loss. Cutting advertising and promo-
tional budgets will also boost short-term prof-
its. Finally, savings on distribution and service
will normally have positive effects on profit-
ability, even though customers may suffer some
inconvenience.
As illustrated in Figure 11.2, the account-
ing approach leads to a completely opposite
marketing mix to the marketing approach.
While the marketing focus, which puts the
customer first, normally leads to broader prod-
uct ranges, lower prices and more spending on
promotion and distribution, the accounting one
leads to the opposite pressures. The cost of the
marketing approach is lower profitability and
cash flow, the cost of the accounting approach
is the longer-term loss of market share resulting
from the lack of customer focus.
Marketers need to be aware that there are
other important problems in considering prof-
its as the objective of the business.

 Short- or long-term profits. Most managers are

conscious of the dangers of focusing on

short-term profits. Cutting projects to boost

this year’s results can lead to permanent

erosion of the firm’s ability to compete. But

emphasizing long-term profits does not help

much because they are so ill-defined. Are

long-term profits defined over 3, 5 or 20

years? How does one deal with the time value

of money?

 Maximum or acceptable profits. Should managers

be seeking to maximize (short- or long-term)

profits or achieving an acceptable level, e.g. the

average return in the industry? Each would give

quite different recommendations when it

comes to the marketing mix. How would

shareholders respond to managers consciously

accepting sub-optimal returns?

 Ambiguity of profit measurement. Unlike cash

flow, profits are a matter of judgement.

Different, but equally legally acceptable

treatments of depreciation, stocks and the

costs of restructuring lead to vastly different

Figure 11.2 Alternative approaches to the marketing mix