Can marketing orientation maximize shareholder value?
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A short evaluation on Doyle's (2000) view about the relationship between the shareholder value and marketing assets (sound off).
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Can marketing orientation maximize shareholder value?
- 1. Does Marketing Context Maximize Shareholder Value? A critical evaluation of Doyle’s view “Marketing is the management process that seeks to maximise returns to shareholders by developing relationships with valued customers and creating a competitive advantage” (Doyle, 2000)
- 2. Different ways to Maximize Shareholder Value Ryals and Knox’s (2005) findings revealed that a customer portfolio review led to improvements in both relationship marketing strategies and SV. Akroush’s (2012) comprehensive study concluded that marketing orientation can substantially improve both customer satisfaction and financial performance with a significant impact on SV. Recent research has strengthened the idea that customer satisfaction boosts Shareholder Value (SV) by increasing cash flow growth and reducing its volatility (Anderson et al., 2004; Gruca and Rego, 2005). Adapted from: Cute Pictures, 2015 These studies confirm Doyle’s view: Marketing can play an important role in maximizing business growth and SV.
- 3. The Relationship between Marketing and Shareholder Value SV in the core objective of marketing strategies (Akroush, 2012) Marketers need to understand “how to evaluate the risks associated with marketing expenditure and linking this assessment directly with SV” (McDonald, 2006, p.102). Marketing Strategies must be evaluated based on how much value they contribute to the effectiveness of business process, financial outcomes and SV (Srivestava et al., 1999; Akroush, 2012). SV P P P P
- 4. Shareholder Value Analysis Model based on Cash Marketing Assets •Marketing Knowledge •Brands •Customer Loyalty •Strategic Relationships Shareholder Value Created Competitive Advantage Opportunity to Create CASH Adapted from: Doyle (2000) and Akroush (2012) Level of Future Cash-flow Time of Cash-flow Risk Attached to the Business Business Continue Value
- 5. References Akroush, M. (2012) An empirical model of marketing strategy and shareholder value - A value-based marketing perspective. Competitiveness Review: An International Business Journal. Vol.22(1), pp.48-89. Anderson, E.; Fornell, C. ; Mazvancheryl, S. (2004) Customer Satisfaction and Shareholder Value. Journal of Marketing. Vol.68(4), pp.172- 185. Doyle, P. (2000) Value-based marketing. Journal of Strategic Marketing. Vol.8, pp.299-311. Gruca, T.; Rego, L. (2005) Customer Satisfaction, Cash Flow, and Shareholder Value. Journal of Marketing. Vol.69(3), pp.115-130. Hooley, G. J.; Piercy, N.; Nicoulaud, B. (2008) Marketing strategy and competitive positioning. 4th ed. Harlow : Financial Times Prentice Hall. Mcdonald, M. (2006) Do your marketing strategies create or destroy shareholder value?. The Journal of Database Marketing & Customer Strategy Management. Vol.13(2), pp.102-107(6). Rappaport, A. (1988) Cash flow analysis of corporate performance. (Finance: A Guide to Creating Shareholder Value). Small Business Reports, Vol.13(9), p.80-87. Ryals, L.; Knox, S. (2005) Measuring risk-adjusted customer lifetime value and its impact on relationship marketing strategies and shareholder value. European Journal of Marketing. Vol.39(5-6), pp.456-472. Srivastava, R. K. ; Shervani, T. A. ; Fahey, L. (1999) Marketing, business processes, and shareholder value: An organizationally embedded view of marketing activities and the discipline of marketing. Journal of Marketing. Vol.63, pp.168-179.
- 6. by Salomé Correia August 19th, 2015 Extract of an assignment on Strategic Marketing - MBA program University of Northampton (UK)
Editor's Notes
- 1. Recent research has strengthened the idea that customer satisfaction boosts SV by increasing cash flow growth and reducing its volatility (Anderson et al., 2004, p.172; Gruca and Rego, 2005). 2. Akroush’s (2012) comprehensive study of organisations using a value-based marketing approach concluded that marketing orientations can substantially improve both customer satisfaction and financial performance with a significant positive impact on SV. 3. Ryals and Knox’s (2005) findings revealed that a customer portfolio review led to improvements in both relationship marketing strategies and SV. 4. These studies confirm Doyle’s view that the role that marketing can play in maximizing business growth and SV.
- 1. This view puts the shareholder value in the core objective of marketing strategies and emphasises the critical need to focus on the marketing mix in this long term concept (Akroush, 2012). 2. Thus, marketing strategies must be evaluated based on how much value they contribute to the effectiveness of the business process, financial outcomes and shareholder value (Srivestava et al., 1999; Akroush, 2012). 3. According to McDonald (2006) marketers need to understand “how to evaluate the risks associated with marketing expenditure and linking this assessment directly with shareholder value” (McDonald, 2006, p.102). 4. Akroush (2012) advocates that “successful marketing strategies are evaluated based on their ability to make significant contribution to business performance as well as shareholder value” (Akroush, 2012, p.50).
- 1. In his seminal analysis of SV Rappaport (1988) proposed an approach which have been taken forward by other scholars, based on four value drivers with critical focus on cash (Rappaport, 1988; Srivestava et al., 1999; Ryals and Knox, 2005). 2. Latterly, the value-based marketing approach suggested by Doyle (2000) considers a Shareholder Value Analysis (SVA) model based on cash which allows marketing performance assessment. He suggests four factors which can create SV: the level of future cash flow, the timing of cash flow, the risk attached to the business and business continuing value. 3. This thorough analysis points out strong marketing assets as the main drivers of all four factors, namely: marketing knowledge, brands, customer loyalty and strategic relationships. 3. Consequently, marketing assets performance depends on how positive the generated cash flows are (Doyle, 2000). 4. In Doyle’s view, “the heart of SVA is the concept of competitive advantage” (Doyle, 2000, p.309) which enables the company to attract and retain customers creating the opportunity to generate cash and maximize SV. (Akroush, 2012).