CHAPTER 20
Controlling marketing and the
measurement of marketing
effectiveness
KEITH WARD
Introduction: scope and content
of the chapter
Controlling both the ‘effectiveness and effi-
ciency’ of marketing requires an integrated
partnership between finance and marketing
managers. Financial control can only be exer-
cised in advance of financial commitment and
this necessitates a rigorous financial evaluation
ofproposed marketing expenditure, as well as
the application of effective financial controls as
the expenditure actually takes place.
Marketing activities are normally abso-
lutely critical to the most common long-term
financial objective of commercially oriented
organizations, which is creating shareholder
value. The best way to create shareholder value
in the long term is to develop and then exploit
a sustainable competitive advantage. This
enables the business to generate a rate of return
substantially in excess of that required by its
investors, i.e. a super profit.
However, developing a sustainable com-
petitive advantage normally involves signifi-
cant upfront expenditures by the business.
These expenditures are high-risk, long-term
investments and should be rigorously evaluated
and controlled, even though any resulting
competitive advantage may be intangible (such
as a brand). The best financial evaluation
techniques for such long-term investments use
discounted cash flows to take account of the
timing differences between the expenditures
and the resulting cash inflows.
If these long-term marketing investments
are successful then the business has created a
marketing asset, which may continue to pro-
duce high returns for many years to come. This
will only be true if the marketing asset is
properly maintained after it has been success-
fully developed. A sensible approach to con-
trolling marketing, therefore, is to distinguish
between development marketing expenditure
and maintenance marketing expenditure, as
their objectives are significantly different.
The objective of development marketing
expenditure is to create a valuable long-term
asset, and hence the returns from this type of
investment will be received over the economic
life of the asset. Conversely, maintenance market-
ing expenditureis designed to keep the existing
marketing assets in their present valuable
condition, and the returns are much more short
term. Indeed, it can be argued that the failure to
spend adequately on maintenance is often