Explains why the integration of the marketing and finance perspectives on business is essential if companies are going to achieve a sustainable balance between value creation and value capture

1. P1Does Marketing Matter? January 2009
Marketing Finance:
An Autobiographical Journey
Marketing Finance Thought Series
Type 2 Consulting
New York
March 2014

2. P2
The Origin of the Species
• A former boss of mine used to say “every company is global
from somewhere” – meaning that, however objective we
believe our viewpoint to be, it is inevitably shaped by where
we come from
• These slides explain the formative influences on my thinking
and the basis for my conviction about the importance of
integrating the marketing and finance perspectives on business

3. P3
I began my career at the
Bank of England (the UK’s
equivalent of the Federal
Reserve) and for the first
10 years of my
professional life, I sincerely
believed that anything that
mattered could be
expressed in numbers.

4. Like the man in this iconic
ad from the 1970s,
numbers were my life.
This attitude survived my
transition from banking to
strategy consulting.
Then something changed...

5. What changed my life was
not Smirnoff but J&B…
And not because I was
drinking it.
Rather, I was working on
the strategy for J&B in
France that included some
radical options for how
the brand should be
positioned and distributed
in the wake of changes in
the laws governing spirits
advertising.

6. I realized that my entire
focus was on reducing the
cost of marketing and
delivering J&B to the
consumer, and not on
enhancing J&B’s value to
the consumer

7. Then a light bulb went off.
Actually, two.
First, I realized that the
ultimate source of value is
the customer. Until value
is created for customers,
there is no value to be
captured for shareholders.
Second, I realized that how
you define value depends
on whether you are
producing or consuming it.

8. As a producer, you define
value as the difference
between the revenues you
generate and the costs of
generating them.
As a consumer, you define
value as the difference
between the benefits you
receive and the price you
are required to pay.

9. Since the price paid by the consumer determines the revenue
received by the producer, then the equation for sustainable
business success simplifies to the balancing of customer benefit
with the economic costs of delivering that benefit.

10. Tilting the balance too far
in the direction of
extracting excessive value
from customers results in
bankruptcy.
Tilting the balance too far
in the direction of
delivering benefits to
customers results in
bankruptcy.
BANKRUPT BANKRUPT

11. Achieving a desirable ratio of economic cost to customer
benefit depends on effective collaboration between two
departments whose relationship is famously fractious.
MARKETING:
Focused on
value creation
for customers
FINANCE:
Focused on
value capture
for the business

12. Marketing professionals
consider Finance like
Oscar Wilde’s cynic –
aware of the cost of
everything and the value
of nothing.
Finance professionals often
regard Marketing as a
peripheral activity focused
on tactical, promotional
activities with limited
business impact.

13. P13
Acknowledging Different Perspectives and Priorities
Marketing Perspective
• Value and Equity are defined
from the perspective of the
customer
• Value is the difference
between the benefit
received and the price
demanded
• Equity is defined in terms of
value delivered
• Ambition is to enhance
customer utility
• Performance is measured in
terms of preference
Finance Perspective
• Value and Equity are defined
from the perspective of the
shareholder
• Value is the difference
between the revenue
received and the costs
incurred
• Equity is defined in terms of
value captured
• Ambition is to enhance
business efficiency
• Performance is measured in
terms of profit

14. P14
Marketing Finance
Only through the integration of the
marketing and finance perspectives
can a sustainable balance be achieved between
value creation and value capture
in the short- and long-run

15. P15
What I Believe
• Customers are the ultimate source of business value
• Sustainable business success is about delivering customer
benefit at attractive economic cost
• Business is not “zero sum” – customers do not have to lose
in order for shareholders to win
• Breakout business success begins with an insight about how
new value can be delivered to customers (which is why Peter
Drucker described marketing and innovation as the two
business disciplines that “produce results”)
• The silo’d structure and orientation of companies towards
short-term value extraction make it challenging to achieve a
balance between value creation and value capture
• That is why the integration of the marketing and finance
perspectives is an essential element of business strategy

16. P16
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j.knowles@type2consulting.com