Estimating The Value Of A Strategy

The process of estimating the value created by a new marketing strategy is fairly simple from a conceptual point of view, there are just three steps:

• Estimate the value of the firm without the strategy
• Estimate the value of the firm with the strategy
• Calculate the difference

The challenges come in making realistic estimates for the cost of the strategy.

Assume that the process of developing a strategy comes in three phases:

• Creativity, innovation and product definition
• Product development
• Product launch and promotion of the product

A lot of products suffer from the following characteristics:

• Over promised
• Over budget
• Over time

I say this not in a pejorative way but more as a recognition that its really hard knowing how much a project is going to cost. Since the whole process is about investing to build value its clear that if the capital needed for the project is much higher than expected then even if the product is bought by a large number of customers and the revenues are very high the strategy still may not add any value to the company.