Controlling marketing and the measurement of marketing effectiveness 513
can launch their own versions is now very
short; e.g. in retail financial services this time
lag can normally be measured in weeks not
years. Thus, the product innovation does not, of
itself, create a long-term sustainable compet-
itive advantage but, if allied to the appropriate
marketing strategy, the business may be able to
exploit it to create considerable shareholder
value. Each individual innovation could be
exploited very rapidly as long as marketing
creates very strong immediate awareness and
instant access to the product (e.g. in retail
financial services, mass advertising linked with
a telephone- or Internet-based sales system).
This strategy increases the associated risk
because all the marketing expenditure is
required upfront; doing extensive marketing
research could easily give away to competitors
the product innovation and hence enable them
to launch their versions nationally at exactly the
same time.
An alternative strategy could be to build a
brand around the innovations developed by the
company, so that it develops a reputation as the
leading innovator in the industry. This branded
reputation may attract a substantial loyal group
of customers and this could create the ability to
earn a super profit; each new product innova-
tion therefore reinforces the brand attributes
rather than having to earn a super profit
itself.
Marketing assets: development and maintenance expenditures
It has already been argued that the most
valuable real assets possessed by most busi-
nesses are in the marketing area. The proper
definition of an asset is anything which will
generate future net cash inflows into the busi-
ness; this clearly includes brands, trademarks,
customers, channels of distribution, products,
etc. Thus, assets are by no means limited to the
normal tangible items which appear on the
balance sheet of the company. This more
general attitude to marketing assets has impor-
tant implications for the control of marketing.
Many businesses still persist with the
classification of marketing expenditures
between ‘above the line’ (meaning mainly
media advertising) and ‘below the line’ (mean-
ing promotions for both trade and end custom-
ers, etc.). This distinction literally refers to
where the expenditures tend to be shown in the
profit and loss account but, in today’s market-
ing environment, they have almost no rele-
vance at all. The increasing power of many
channels of distribution (such as supermarket
retailers) and even consumers, let alone indus-
trial customers, together with an increasing
fragmentation in mass advertising media (e.g.
TV channels), has led to a significant increase in
the proportion of many marketing budgets
which is spent ‘below the line’, i.e. directly to
channels and end customers. If this is a more
effective means of achieving the marketing
objectives of the business, it is extremely
sensible to do this; the change in classification
is irrelevant.
A much more important way of analysing
marketing expenditure has unfortunately been
ignored by many companies. Creating any
valuable long-term asset requires the invest-
ment of substantial funds, as has already been
discussed. This is also true of marketing assets,
which require significant expenditure during
their developing periods. This development
expenditure creates the attributes of the asset
(e.g. brand awareness, distribution access, cus-
tomer loyalty), which will generate the super
profit returns of the future.
Once the marketing asset has been devel-
oped to its full potential, as with any asset, it
must be properly maintained or it will decline
in value very rapidly. A feature of many
marketing assets (such as brands) is that some
of their attributes can decline very quickly
(such as brand awareness) if they are not
properly maintained. Thus, another component
of the marketing budget is maintenance
expenditure. Development expenditure is
designed to increase the long-term value of the