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Marketing and Finance: Creating Shareholder Value by Keith Ward, Brian Smith, Malcolm McDonald

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9

Managing high-risk marketing strategies

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Most marketing plans do not explicitly take account of the risks associated with proposed marketing strategies. The diagnostic phase of the Marketing Due Diligence process not only highlights all of these associated risks, but also identifies the critical risks that could have the greatest impact on the predicted financial outcomes.

The therapeutic part of the Marketing Due Diligence process concentrates on these critical risks and assesses whether modifications to the originally proposed marketing strategy could significantly reduce them and, as a result, increase the shareholder value created. This focused, detailed approach to altering a marketing strategy is only possible because the overall risk profile has been disassembled into its constituent parts so that the critical areas of risk are highlighted. There may be costs incurred in reducing the level of these critical risks, but the resulting reduction in the level of the required financial return can make this expenditure shareholder value enhancing.

The risks assessed in the Marketing Due Diligence process include both controllable and uncontrollable risks. Even though uncontrollable risks cannot, by definition, be directly controlled by the business, they can normally be predicted and, in many cases, can also be indirectly influenced by modifying the marketing strategy. Shareholder value creation is impacted by both types of risks and hence economic performance measures ...

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