Summary: Value Based Marketing Strategy

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Summary: The author argues that ROI is the most effective method of measuring marketing efforts, because it incorporates all costs. This allows the company to maximize profits and prioritize marketing investments. The author lays out his assumptions, such as that maximizing profits is the most important consideration for business. His model shows that ROI has a number of subcomponents, including customer lifetime value, total number of customers, and marketing expense, the latter of which is the denominator. These are tier 2 priorities, because focusing on each of these areas facilitates the growth in profits. The third tier is comprised of performance indicators. ROI, he argues, should be used strategically, to help set organizational priorities. Taken in total, the author is arguing that the endeavors with the greatest ROI are those that should be undertaken by the firm, because these are the initiatives that contribute most to profit. Value-Based Marketing Strategy: A value-based marketing strategy emphasizes the maximizing of value relative to the cost. This is at the heart of ROI as a concept, so Lenskold's paper is a good conceptual fit. ROI comprises the same two components that value-based marketing does, in terms of the cost and the benefit. Value in value-based marketing sometimes refers to total utility, but in this case "return" is simply an adaptation of that concept. The return on the investment, using Lenskold's framework, consists of both immediate

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