Controlling marketing and the measurement of marketing effectiveness 511
been done by certain brands, such as Coca-Cola
and Marlboro), but this will normally require
additional expenditure on maintaining the
entry barrier. Alternatively, the business may
decide to reinvest part of its initial super profits
in developing a replacement sustainable com-
petitive advantage for when the initial advan-
tage ceases to be effective. Examples of this are
pharmaceutical companies which often invest
heavily in branding their patented drugs dur-
ing the patent period. This actually reduces the
level of super profit during this period, as they
are then effectively a monopoly supplier, but it
can create strong customer loyalty, which can
work as a very effective competitive advantage
once the patent has expired.
These development, maintenance and rein-
vestment activities must be subjected to the
rigorous financial evaluation already discussed,
and this is considered in detail below. However,
these entry barriers are the really important
sources of shareholder value creation and
should therefore be managed as the key assetsof
the business. Unfortunately, apparently because
many of them are intangible and somewhat
nebulous to most finance managers, many
companies still regard their fixed assets (facto-
ries, offices, plant and machinery, etc.) as the
only real assets of the business. Without any
intangible marketing assets to exploit, these
tangible assets would probably generate, at
most, the shareholders’ required rate of return.
All of these sustainable competitive advan-
tages are, by definition, really relative state-
ments in that they refer to things which the
business does better, cheaper, faster, etc., than
anyone else. They also need to be considered in
the context of the customers who are willing to
continue to pay a price for the good or service
which enables the supplier to generate a super
profit. In other words, the customers must still
perceive themselves as getting good value for
money, even in the absence of direct, effective
viable competition. This means that the finan-
cial evaluation and control process must also
have an external focus in that it must include an
analysis of competitors and customers. This
competitor analysis must not be limited only to
obvious existing competitors, as new potential
competitors may be attracted to any industry or
sector which is generating significant super
profits. Indeed, existing customers and even
suppliers may be tempted to become com-
petitors through vertical integration if the
potential returns are high enough. It is essential
that the company’s current position is protected
as far as possible by investing in creating strong
entry barriers to deter all the identified poten-
tial competitors. Once again, finance managers
are most unlikely to identify, on their own, all
the potential novel marketing strategies which
competitors may initiate to try to break through
an existing entry barrier. Competitor analysis
therefore needs to be done as a co-ordinated
effort, utilizing all the knowledge and skills
available within the business.Investing in developing a sustainable competitive advantage
As stated above, many marketing activities
should be evaluated and controlled as strategic
investment decisions, irrespective of how they
are treated for financial accounting purposes.
Any financial investment involves spending
money now in the expectation that, in the
future, returns will be generated to more than
recover the initial expenditure. Where the
period over which these expected returns will
be received is likely to be much longer than the
current financial year, it is important that a
proper financial evaluation is carried out. This
is particularly vital where these investment
expenditures are regarded as high risk, due to
the volatility associated with the potential
outcomes. If the success of these investments is
also critical to the achievement of the organiza-
tion’s long-term objectives and overall mission,
the need for a sound financial evaluation and
control process is absolutely paramount.