Value Appropriation
Value appropriation: vital in achieving sustained competitive advantage
Table of contents
1 Introduction 3
2 The role of marketing 4
3 Measuring marketing productivity 5
3.1 Customer Satisfaction and future cash flows 7
3.2 Shareholder value 9
4 Creating sustained competitive advantage 10
4.1 Value creation versus value appropriation 10
4.2 Strategic emphasis in practice 11
5 How to prevent imitation? 13
6 Limitations 16
7 Conclusion 17
References 19
1. Introduction
The lack of marketing’s accountability has threatened the position of marketing within organizations. According to the Marketing Leadership Council, 70% of advertising budgets are in decline (as cited in Rust, Ambler, Carpenter, Kumar and Srivastava, 2004, p. 76). A central issue is the measurement of marketing productivity. To strengthen the position of marketing within an organization, many researchers developed frameworks in order to make marketing expenditures more accountable. Recently, there has been growing interest in how marketing expenditures add to shareholder value. To establish this relationship, customer satisfaction should be linked to cash flows (Rust et al., 2004). Increasing cash flows in turn will lead to increasing shareholder value.
The goal of a marketing strategy is to achieve sustained competitive advantage. In order to achieve this advantage, a company can choose between two strategic emphasises: value creation or value appropriation. Value creation is defined as innovating, producing and delivering products to the market and value appropriation is about extracting profits from innovations. Mizik and Jacobson (2003) state that a firm’s strategic emphasis depends on the industry, the firm’s capabilities and profitability. Although, firms should focus on a balance between value creation and value appropriation, rather than the choice between them (Mizik &
Table of contents
1 Introduction 3
2 The role of marketing 4
3 Measuring marketing productivity 5
3.1 Customer Satisfaction and future cash flows 7
3.2 Shareholder value 9
4 Creating sustained competitive advantage 10
4.1 Value creation versus value appropriation 10
4.2 Strategic emphasis in practice 11
5 How to prevent imitation? 13
6 Limitations 16
7 Conclusion 17
References 19
1. Introduction
The lack of marketing’s accountability has threatened the position of marketing within organizations. According to the Marketing Leadership Council, 70% of advertising budgets are in decline (as cited in Rust, Ambler, Carpenter, Kumar and Srivastava, 2004, p. 76). A central issue is the measurement of marketing productivity. To strengthen the position of marketing within an organization, many researchers developed frameworks in order to make marketing expenditures more accountable. Recently, there has been growing interest in how marketing expenditures add to shareholder value. To establish this relationship, customer satisfaction should be linked to cash flows (Rust et al., 2004). Increasing cash flows in turn will lead to increasing shareholder value.
The goal of a marketing strategy is to achieve sustained competitive advantage. In order to achieve this advantage, a company can choose between two strategic emphasises: value creation or value appropriation. Value creation is defined as innovating, producing and delivering products to the market and value appropriation is about extracting profits from innovations. Mizik and Jacobson (2003) state that a firm’s strategic emphasis depends on the industry, the firm’s capabilities and profitability. Although, firms should focus on a balance between value creation and value appropriation, rather than the choice between them (Mizik &
References: Gruca, A., & Rego, L. (2005). Customer satisfaction, cash flow, and shareholder value. Journal of Marketing Lawson, B., Samson, D. & Roden, S. (2012). Appropriating the value from innovation: inimitability and the effectiveness of isolating mechanisms Meyer, J., & Subramaniam, M. (2012). Appropriating innovation’s technical value: Examining the influence of exploration