Marketing is always, and rightly so, given a tough time when it comes to proving its worth – both in terms of measurment (measuring RoI) and in terms of impact on driving a business forward. Much of the debate is lost given how marketing is perceived or what responsibilities fall within marketing.
Smart marketing can extract insights from customers that redefine how an organisation operates and sells through to what products are developed and launched. However, many commentators take the narrow view of marketing as what is spent on ‘marketing mix’ activities, such as: direct mail, events, sponsorship, magazine advertising, etc. In this case, marketing can be seen as a pure cost centre – and so, it is essential that clear objectives and Return-on-Investment (ROI) metrics are in place to evaluate delivery. In the broader and what I say should be the true responsibilities of marketing, of course more advanced metrics (such as Activity based Costing (ABC), Net Present Value (NPV) – among others) should be used as well to fully appraise the investment and financial decisions.
I have been asked by B2B Marketing magazine to speak at their B2B Leaders Forum and as part of this B2B Marketing have given me a sneak preview of their upcoming ‘2013 B2B Leaders Report’. This report will be fully revealed at the B2B Leaders Forum at The Institute of Contemporary Arts in London on 19th September 2013. You can also hear me speak there on ‘Mobile and Social – Surfing the Wave of the B2B Digital Revolution’.
79% of B2B leaders agree that not being able to measure ROI would make it hard to justify future investments in marketing
One early, unpublished result they sent me is: “79% of leaders agree that not being able to measure ROI would make it hard to justify future investments in marketing.” The only surprise with this result is why only 79% – and not 100%. Where do the 21% ‘who do not agree’ work? Are they in organisations that are irrational, run by gut-instinct or old-style dot.coms from 2001? Or perhaps, they believe that Apple is so wonderful that they just focus on the customer, design, positioning and ‘get it right’? Well anyone who has been to an Apple head office will tell you about the discipline, rigour, attention-to-detail and financial appraisal.
In the current economic climate, marketers and indeed all ‘business folk’ must juggle a number of priorities: understand fast-evolving customer needs, deliver an engaging and consistent customer experience, focus on the ‘so what’ of all marketing and business building activity to ensure profitable brand and business growth. This must flow from clearly defined objectives that resonate with the Board and are measurable – be it in terms of hard, quantifiable data or ROI or market sentiment.
A history lesson
The first major ‘marketing ROI’ model that I had to develop was over seventeen years ago at Procter & Gamble when I was responsible for launching a new brand. All cost, expense and revenue factors (such as awareness, trial, purchase, marketing spend, exchange rates) were modelled with percentage likelihood to hit, miss, exceed targets – so performance could also be tracked. And financial modelling calculated the measures of payback, Internal Rate of Return and NPV weighted according to probabilities. We must have done something right as the analysis showed that we only had a 55% chance of a positive NPV in a category where the Financial times said that products had a shelf life of less than 3 years. Well, it’s more than seventeen years on – and Hugo remains P&G’s most successful fragrance launch and still is a top seller in the UK and globally. Payback, IRR and NPV more than achieved.
Back to 2013
The digital, always-connected, always-sharing world has bought marketing to the fore from realising real-time customer and investor insights through to generating profitable growth from these new digital channels. So, the the need for financial rigour in all marketing and business decisions is more crucial now – especially if marketers are looking to advance their career.
Despite this, we regularly hear about the failings of senior marketers/CMOs to measure the effectiveness of their activity or generate the impact at a board level especially amongst their CFO or COO colleagues. Marketers need to show more rigour and discipline; always asking ‘so what’ linking objectives, action and metrics – and so, define what results/success looks like and how they are evaluated before starting any activity.
Furthermore, this may impact the progression of senior marketers. In the UK, many Marketing Directors or CMOs only have responsibility for brand, awareness and sales support (and not P&L, strategy, product or customer experience). This coupled with a lack of hands-on finance and operations experience – means that they are more likely to lose out in top jobs and not reach MD/CEO level – whereas their CFO and COO colleagues are more likely to succeed.
Food for thought…
You can read my full article on B2B Marketing’s site – and see you on the 19th September 2013 at the ICA in London.
Written by Dowshan Humzah, Director Digital Development & Consulting, The Worst Kept Secret
Dowshan Humzah has delivered profitable business growth via product development, brand innovation and digital channel expansion for blue-chip companies across Financial Services, Internet, Telecoms, Media and FMCG as well as business start-ups. He shows how organisations can benefit from applying a ‘digital and social media lens’ across their core organisational objectives and then answer the ‘so what’ question in order to generate customer and financial value from digital tools. You can find him on LinkedIn and Google+.
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