Optimising marketing spend: return maximization and risk minimization in themarketing portfolio
In a world of limited resources, marketing managers tasked to delivershareholder value face decisions about how to maximize the returns on theirmarketing portfolio. Risk is less often considered. In finance the picture isvery different; financial portfolio management is concerned with both risk andreturns. The central innovation in this paper is the application of modernportfolio theory (MPT) to the management of marketing portfolios in foodretailing and in drinks manufacturing. The authors develop a model thatcalculates an efficient frontier of marketing portfolios that maximize overallreturn within certain risk constraints, first for a simple two-segment marketingworld and then for a more realistic multi-segment portfolio. However, marketingportfolios differ from financial ones in the sense that the allocation ofmarketing spend affects the returns from the portfolio. Therefore, a secondinnovation, an extension of MPT to take account of marketing spend allocationdecisions, has been developed. Using this model, marketers can determine therisk and the returns of marketing investments, helping them select an optimalportfolio. This would go some way to ensuring that marketing contributes toshareholder value creation, currently one of its major challenges.
Year of publication: |
2007-11-01
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Authors: | Ryals, Lynette ; Dias, S ; Berger, M |
Publisher: |
Westburn Publishers |
Saved in:
freely available
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