Marketing and Finance

Topics: Marketing, Product management, Strategic management Pages: 9 (2167 words) Published: February 21, 2013
Marketing and Finance
All marketing plans should include a major financial dimension. Evolution of cost and profit (for the brand, product, product line, etc.) expressed in monetary units or percentage of sales, budgets needed to implement strategies and marketing plans are all necessary components of the marketing plan. Budgeting and profitability analysis are also key aspects of marketing planning and control, which implies financial tools [12].

Many of the marketing decisions are and should be viewed as investment decisions. Whenever a new product decision is made, financial instruments and criteria should be used to evaluate the investment [13]. This type of evaluation of marketing decisions should not be limited to new products and should include decisions on advertising, promotion, price and distribution (virtually all elements of the marketing mix). Cross-functional linkages between marketing and the other business [...] ind. organization 245 The link between marketing and finance is not limited to the use of financial input when developing marketing strategies and plans. The development of any financial plan involves capital requirements, cash flow analysis, credit and other financial policies that require marketing inputs. Such inputs, especially those related to sales and revenues forecasts that are listed in different marketing plans are essential for any financial planning [14].

Moreover, a marketing approach to financial decisions offers a new perspective usually lacking in the specialized financial literature. Consider, for example:
ƒ The utilization of the annual financial reports and other reporting documents as elements in a communication campaign addressed to the financial community;
ƒ The evaluation of responses related to changes in price, payment methods, discounts and credit;
ƒ The application of financial performance indicators to relevant market segments and/or certain products;
ƒ The impact of different marketing activities (example – launching new products) on investors’ expectations and, consequently, on the market price of the shares.
All these links and interrelationships between the activities performed by marketing and finance are presented in table 2:
Table 2
Links in interrelations between Marketing and Finance
Marketing Activities Type of relation Finance Activities
Market evolution forecast;
Sales evolution forecast.
Capital requirements &
Financing needs
Cash Flow Analysis
Marketing Planning and
establishing marketing activities
(marketing mix)
Capital requirements &
Financing needs
Controlling and monitoring
marketing activities;
Product management decisions

Define financial profit
Decisions about pricing policies
(marketing mix )
Establishing credit policies for
different categories of clients
Integrated marketing
communication activities
(marketing mix )
Reporting financial results 246 Daniel Micu, Liliana Ifrim, Cătălina Daraban, Claudiu Purdescu 3.3. Marketing and Production
The link between marketing and production is a dual one. On one hand, production capabilities determine the number and type of products which can be marketed, and, on the other hand, a more accurate prediction of sales forecast for each product and product line is essential for efficient production operations [15]. Taking into account the fluctuations and uncertainties in the demand of most products and the difficulties they create in achieving efficient production operations, management can undertake two major strategies: a) change the production capacity by changes in current resources (overtime, 2 nd

and/or 3
etc.), improved inventory management, subcontracting, etc.; b) influence the nature, level or timing of demand in agreement with the production capacity constraints. This latter strategy can be obtained by using specific marketing strategies such as advertising, sales promotion, pricing, product (by adding or removing...
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