WHERE DOES MARKETING FIT INTO THE CAPITAL BUDGETING EQUATION?

In order for a firm to grow, the firm must often implement various growth-oriented projects. After a number of new project ideas have been generated, the initial list of ideas is screened and those ideas that are inconsistent with the organization's strategy or are otherwise deemed inappropriate are eliminated from consideration. Ideas that survive the initial screening process are then examined for financial feasibility using any or all of the recognized capital budgeting techniques to select which projects should be pursued and funded. However, financial projections are all too often made on the assumption of "all else being equal. " The significance of marketing activities that may determine—or increase—the value of a particular project under consideration by a firm, is seldom directly recognized in finance. This discussion examines the significance of marketing in evaluating the investment potential of a project, which in turn determines whether a given project is—or is not—approved