The Marketing Book 5th Edition

STRATEGY/LONG-TERM PLANS

TACTICS/BUDGETS

GOALS/OBJECTIVES

MISSION

Controlling marketing and the measurement of marketing effectiveness 515

The financial planning and control process

The main objectives of any financial planning
and control process are to enable the organiza-
tion to develop, implement and control a
strategy which seeks to achieve its long-term
objectives and overall mission. A good control
process would indicate when modifications
were needed in the overall strategy through
short-term feedback loops and appropriate
performance measures. Thus, as indicated in
Figure 20.4, the long-term objectives must be
consistent with the short-term budgets actually
used by the company on a regular basis.
It is an obvious but important statement
that this year’s budget must be the first year of
the long-term plan but, in many companies,
this does not stay the reality as the year
unfolds. No plan is ever implemented without
significant modifications, not least because
there are always unforeseen changes in the
external environment. Hence, during the year,
the tactics and even the strategy may need to be
changed. It is important that these required
changes are, as far as possible, still consistent

with the long-term objectives of the business.
At least these long-term objectives should be
taken into account as the possible modifications
to the strategy are being considered. Unfortu-
nately, in many cases, changes are made during
the year which enable the short-term budget to
be achieved at the expense of these long-term
objectives.
This can happen because the performance
measures in use within most businesses focus
almost exclusively on the short-term budget
period (i.e. this year). This would not neces-
sarily matter as long as these performance
measures include clear indicators of how the
business was doing in terms of its long-term
objectives. In most cases these longer-term
performance indicators are missing. Hence, as
discussed in the previous section, it is quite
common for the main performance measures to
focus on sales revenues and profits this year,
even though the long-term strategy may be
based on the business developing new sustain-
able competitive advantages. This concentra-
tion on short-term performance increases the
pressure on managers to compromise on
longer-term investments in order to deliver the
required performance now. Marketing expendi-
ture is the major target area for this due to the
expensing, in accounting terms writing off all
expenditure in the current year, including long-
term development activities; few people would
consider it completely sensible to stop halfway
through building a new factory in order to try
to boost profits this year, yet companies often
curtail marketing development spending on
brands, etc. to achieve the same thing.
It is therefore very important that busi-
nesses develop an appropriate set of perform-
ance measurements, which are both closely
integrated with their long-term objectives and
provide early indications when things are
going wrong. A business actually needs per-
formance measures at three different levels if it
is really to stay in control of its long-term
performance.
The highest level of performance measure
Figure 20.4 Very simple business model relates to the overall economic performance of