It is still by no means certain that a marketing strategy will create shareholder value even if, when implemented, the strategy achieves the predicted market share of a market that generates the planned total sales revenue values. There are other risks that need to be assessed, and these are covered in the Marketing Due Diligence diagnostic process by the assessment of profit risk. Profit risk assessment considers the probability of creating the anticipated financial return from the predicted market share of the planned market value.
Not surprisingly, therefore, the profit risk is normally most important in relatively mature markets where established competitors, and other stakeholders in the total industry value chain, are often fighting to obtain a larger share of a static or even declining total profit pool.
As before, the total profit risk assessment has been subdivided into five elements, which are separately assessed in order to generate an overall view of the probability of achieving the planned level of profitability.
The first of these five elements, profit pool risk, assesses the probability that the future total profit pool will be less than planned. This risk is clearly higher if the existing profit pool is static or shrinking and lower if the targeted profit pool is high and growing. Another factor impacting on this risk is the relative proportion of this total available profit pool that the marketing strategy aims to take; the higher ...