Overview The overriding aim of a company is to create value for its shareholders on a sustainable basis over the long term. In order to create this value, the company has to develop and then exploit one or more sustainable competitive advantages, which will allow it to earn super profits on a continuing basis. Most modern sustainable competitive advantages are the result of the suc-

cessful implementation of marketing strategies (e.g. brand building, customer loyalty development, market segmentation). These marketing strategies normally require significant long-term upfront investments which must be regarded as high-risk expenditures by the business, because if they do not work, the expenditure is often irrecoverable. It is therefore vitally important that these strategic marketing investments

are rigorously financially evaluated prior to their commitment and properly financially controlled during their economic lives. This can only be effectively achieved by an integrated marketing finance approach. If, however, these marketing strategies are very successful they can create the most valuable assets owned by most modern businesses, which are represented by intangibles such as brands, marketing knowledge regarding customers and channels, technical know-how, patents and licenses. These intangible assets can produce very high rates of return for many years, if they are managed properly. Therefore a strategically oriented marketing finance system is needed to evaluate and control these assets, if the business is to optimise the shareholder value generated. Real shareholder value is created by earning, on a sustainable basis, a rate

of return exceeding the risk-adjusted required rate of return for any particular business. This can be measured in several interrelated ways: as the net present value of the future expected cash flows from the business, using the required rate of return as the discount rate; as the economic profit, or residual income, earned in a particular year (this is the excess return over the required rate of return for the business in that year); as the total shareholder return achieved by the investors in the company on an annual basis, this is the total of any dividend yield received from the company plus or minus the movement in the share price during the year.