Basic Marketing: A Global Managerial Approach

Perreault−McCarthy: Basic

Marketing: A

Global−Managerial

Approach, 14/e

20. Managing Marketing’s
    Link with Other Functional
    Areas

Text © The McGraw−Hill

Companies, 2002

582 Chapter 20

business. They don’t even stop to figure out if the firm’s specific plan makes sense—

because it’s the Internet label that makes it hot. Oddly, by the time a type of business

has attracted enough attention to have fad value to investors there’s already likely

to be a lot of competition. Then it’s usually too late to have an innovative strategy.

The time horizon for profit and growth that investors have in mind can be very

important to the marketing manager. If investors are patient and willing to wait for

a new strategy to become profitable, a marketing manager may have the luxury of

developing a plan that will be very profitable in the long run even if it racks up

short-term losses. Many Japanese firms take this approach. However, most market-

ing managers face intense pressure to develop plans that will generate profits quickly;

there’s more risk for investors if potential profits are off in the future.

It is often a challenge to develop a plan that produces profit in the short term

and also positions the firm for long-run success. For example, a low penetration price

for a new product may help to prevent competition and to attract repeat purchasers

long into the future. Yet a skimming price may be better for profits in the short

term. Even so, the marketing manager’s plans must take the investors’ time horizon

into consideration. Unhappy investors can demand new management or put their

money somewhere else.

Investors usually want detailed information about a firm’s plans before they invest

money in the firm’s stock. The firm’s financial people usually provide this informa-

tion, but financial estimates don’t mean much unless they’re based on realistic

estimates of demand, revenue, and marketing expenses from the marketing man-

ager. An optimistic marketing manager may be hesitant to lay out the potential

limitations of a plan or its forecasts—especially if the full story might scare off

needed investors. However, this is an important ethical issue. While investors know

that there is always some uncertainty in forecasts, they have a right to information

that is as accurate as possible. Put another way, just as a marketing manager

shouldn’t mislead a buyer of the firm’s products, it’s not appropriate to mislead

investors who are buying into the firm’s marketing plan.

A firm that has a promising
marketing plan will usually have
more success in obtaining
financial resources from external
lenders or investors.

Investors’ time horizon
is important

Forecasts may become
an ethical issue