Managing M

Marketing Risks

Chapter – IX

Managing Marketing Risks

“Many of the pioneers of Internet business, both dot-coms and established companies, have competed in ways that violate nearly every precept of good strategy. Rather than focus on profits, they have sought to maximize revenue and market share at all costs, pursuing customers indiscriminately through discounting, give-aways, promotions, channel incentives, and heavy advertising. Rather than concentrate on delivering real value that earns an attractive price from customers, they have pursued indirect revenues from sources such as advertising and click-through fees from Internet commerce partners”.

- Michael E Porter[1]

Understanding marketing risks

To retain their competitive edge, companies have to offer products that provide value to customers. If a company does not have a product to sell or if it has a product, which is inferior to what competitors are offering, it cannot survive in the long run.

Each new product launch involves risk. Similarly, dependence on a few customers also results in risk. Wrong communication strategies can dilute or harm the image of a brand. An organization is also exposed to risk when its distribution channels wield high bargaining power. In short, marketing risks refer to the uncertainties involved in designing and implementing the marketing mix.

Effective marketing implies balanced and informed decisions that lead to long term profitability. Quite often, strategies that focus on short-term objectives, may look attractive but may turn out to be risky in the long run. For example, reckless brand extension may yield immediate benefits, but in the long run may dilute the brand image. The same argument applies to sales promotion. Similarly, advertising without a fundamental understanding of the customer’s decision-making process may throw money down the drain. So, it is important to understand the risks associated with different marketing activities.

The...