directiongroup marketing accountability - edge event slides may 2014
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In these challenging times marketing professionals can be sure of one thing: accountability for their actions and expenditure is going to become ever more important. With digital marketing tactics offering near-instant measurement and executive management demanding greater, deeper insight into marketing performance the need is for marketing to get onto the front foot and become more accountable. With budgets and marketing performance under greater scrutiny than ever and brands demanding ever greater levels of ROI on their marketing expenditure the question is, if marketing is required to deliver ROI, what exactly is the ‘asset’ that marketing funds are being invested in? How can Marketing get gain greater alignment with the Finance department and closer to the management top table? What measurement approaches should I put in place to justify our marketing efforts?TRANSCRIPT
© DirectionGroup 2014
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Marketing Accountability and ROIEDGE Best Practice Forum 22nd May 2014
Event Highlights
“63% of blue-chip Marketing VPs are dissatisfied with their marketing
performance measurement systems”
Marketing Leadership Council report, USA, 2007
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Why has marketing effectiveness measurement proven so difficult?
1. Black box communication – do we understand how communication actually works?
2. Time and timing - Not every message received results in immediate response
3. Source of message or incentive - Consumers see between 2,000 and 5,000 branded messages per day
4. Those annoying intervening variables – that marketing cannot control
5. Corporate versus communication timescales – your ‘financial year’ timescale doesn’t matter to customers
6. How good is your data? – is your data robust enough for you to rely on?
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Companies are seeking new standards of proof in the justification of marketing expenditure:
“…these new standards are driven in part by the current economic climate but are also a function of growing corporate intolerance for the lack of ROMI discipline that has traditionally characterized much of brand (and marketing) spending”
Tim Ambler, London Business School
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Employing poor or non-existent metrics
Lack of desire to be measured No ‘professionalism’ Never follow through Hides behind ‘the customer’ Too prepared to use jargon and
technobabble Big gap between planned and
actual behaviour All other Departments are
accountable except Marketing
What ‘Finance’ thinks of ‘Marketing’
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Lots of measures for cost; not many for revenue (see a standard P&L)
Knows the cost of everything but not its value
Obsessed by numbers Don’t understand customers’
motivations and behaviour Don’t understand that not all
communications has an immediate result
What ‘Marketing’ thinks of ‘Finance’
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Marketing still needs to prove its value to business
Unless we differentiate between ‘softer stuff’ and ‘marketing facts’ then Finance won’t take us seriously
Marketers don’t understand accounting systems
Favouring creativity over accountability
Why Marketing struggles at the boardroom table?
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“Marketers must be more than functional specialists to win over Chief Executives. Marketers fail to reach board level because they are not fluent in the language of finance. Success requires a new set of skills”
Sir Roy Gardner, CEO Centrica plc
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We need a new marketing model because: How it (marketing) used to be – no longer works Declining effectiveness of mass marketing/media The changing customer – ever more discerning, more information
available Increased pressure on corporate profitability Digital communications are making outputs easier to measure
A need for a new marketing model
SO, MARKETING NEEDS TO BECOME MORE ACCOUNTABLE
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The 5 stages of Marketing Accountability
DENIAL
“Marketing is an art not a science. It cant be measured”
Leads to Marketing being isolated
FEAR
“What is my marketing doesn’t impact the bottom line?”
Accountability is a double-edge sword. You can look like a star or a disaster? Can you take the risk to find out?
CONFUSION
“I know I should measure market results, I just don’t know how”
You know measurement is inevitable so a few basic output measures are instigated but no overall view of how marketing impacts the bottom line
SELF-PROMOTION
“Hey come look at all my charts and graphs!”
In a desperate attempt to look accountable they measure anything and everything and produce a chart to prove it. However, they don’t appreciate the connection to hard revenue, profits and growth, creating an impression of ‘soft KPIs’
ACCOUNTABILITY
“Revenue starts with marketing”
Marketing finds its true place in the revenue pipeline. Marketing stops being a cost-centre and starts justifying expenditure based on business building outcomes. The organisation supports and believes in marketing form the top down and the right tools and processes are put in place. The CMO acts and talks like a true C-level and Marketing has a seat at the top table.
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What business really wants from Marketing?
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Marketing managers must aim to deliver one of 4 goals for the CEO:
1. Increase cashflow
2. Accelerate cashflow
3. Stabilize cashflow
4. Build or enhance shareholder value
What CEOs want from Marketing
REMEMBER!Little else matters to CEOs!!!
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“I get paid to make the owners of the company more wealthy with each passing day. Everything else is just fluff.”
Roberto Goizueta, CEO, Coca Cola Corp
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She has the ear of the CEO and is widely respected within business
She can help you become more commercially focussed
You can use her to get more budget
FDs know how to model numbers efficiently and if you ask her she’ll do all the number work!
Get the FD on your side & nobody will bother you!
Why your Finance Director should be your new best friend
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EDGE Marketing Best Practice Forum - Marketing Accountability22 May 2014 14
It’s INVESTMENT The definition of ‘investment’ was “money invested into an
asset with an expectation of profit” Investment in what? Invest in ASSETS The definition of ‘assets’ was “anything a person, company, or
group owns or is owed, including money, investments and property”
The asset is, therefore….the customer
So, let’s reprise, what is the in ROMI?
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22 May 2014
Marketing expenditure is applied to the customer as an asset to increase their value
We can raise the value of the customer asset by investing marketing expenditure in different ways
Return on customer investment delivers in different timeframes and in different ways
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The ‘asset’ is……
Think of ROMI as another name for ‘profit’
Profit is the goal, ROMI is the measure
Treat the marketing budget as a ‘loan’ from the company that has to pay back
Think of marketing channels as ‘different ways of making money’
‘INVEST IN CUSTOMERS’ …….don’t ‘spend marketing budget’
Change the way you think
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Where next?
Develop an accountability culture
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“Without the right measurement, we really don’t know how well our efforts work. We don’t really know if we’re in touch with our consumers. This is a $450billion industry and we’re making decisions with less data and discipline than we apply to $100,000 decisions in other aspects of our businesses. We lack an industry standard for measurement. We need a method to determine the effectiveness of our efforts”
Jim Stengel, Chief Marketing Officer, Proctor & Gamble
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CEOs don’t care about the open rate of your last email campaign or your last press release’s number of views
Use metrics that matter to the CEO and CFO: they care about revenue and profits: – How much faster are we growing now versus last quarter? Last year? – How much profit was made last quarter versus this quarter? – How much revenue and profit do you forecast for the next quarter? – Why are you confident in the above answers?
By speaking the same quantitative language as the CEOs and CFOs, marketers will better communicate marketing’s value and impact
Measurement builds respect and accountability
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But beware, what we said earlier…….
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What should you measure?
What matters to your business? Who do you measure for (vanity or sanity?) Can you acquire data good enough to evaluate? Will the metrics help you make better decisions How will measurement increase the amount or value of customers?
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