How can marketing become more affordable and value creating?

Marketing spends lots and, if this is done intelligently, it contributes lots to sales and to profits; done ignorantly, it wastes lots.

Yet a recent report, Return On Ideas, commissioned by CIM, CIMA and the DMA found too often marketing budgets are wasted through ignorance.  And this just needn’t happen when both parties could spend a day or a week applying the findings of the report.

We set out to define some practical steps that can be taken to strengthen working relationships and get better results. We include checklists and procedures that can be applied practically – even in one day or one week you can achieve significant improvements.

What mistakes do companies typically make?

Affordability is the key to intelligent marketing – it’s the counterbalance to marketing’s aspirations. It’s also where finance should help by telling marketers things they don’t already know about what is and isn’t affordable. While affordability should never destroy marketing’s aspirations and creativity, creative tension between affordability and aspiration is good.

Ignorance about affordability leaves marketers too reliant on aspiration, leading them to make mistakes. The first mistake marketers make is buying “must-have” iconic data on brand awareness, customer satisfaction and loyalty. The second mistake is spending time and money watching PowerPoint presentations of this iconic data. The third and final mistake is the pursuit of aspirational goals that are unaffordable.

Iconic “must-have” status has been conferred on certain data items by conference speakers, books and articles. Marketers also face great pressure to buy from hundreds of data, research and polling firms and, as a result, they collect data a bit like boy scouts collect badges, based on aspirations. Let’s look at the three common “must-have” metrics and the balancing act between aspiration and affordability.

Brand awareness is “Top of the Pops” in marketing. Often it’s low say, for example, 50 percent of the population are brand aware. Aspiration can lead marketers to chase 60 or 70 percent brand awareness. But the affordability test may lead the wise marketer to abandon their aspirations. So what if we’re not famous? Is awareness-raising likely to succeed – at an affordable cost – and will the benefits outweigh the costs?

Customer satisfaction is another aspirational metric. Sat-scores often hover round 6 or 7 out of 10. Consumer behaviour research explains this – most products and services are intrinsically boring and so never achieve 10 out of 10. Aspiration again can make management want to chase 100 percent satisfaction scores. Again the affordability test may lead the wise marketer to abandon their aspirations. So what if all our customers aren’t delighted? Is it feasible and affordable; will the benefits outweigh the costs?

Loyalty is the third iconic metric. It’s never high, customers are naturally promiscuous purchasers and in some markets it’s really low. Aspiration once more leads to macho slogans about “zero defections”. Affordability considerations may refocus intelligent marketers on customer acquisition, and driving down the costs of acquisition, despite retention being the more fashionable idea.

Don’t misunderstand, market research, polls and surveys can sometimes contribute useful information. However, they should always stand alongside financial information about affordability, nor should they support marketing in the same way that a lamp-post supports a drunk.

What is the Return on Ideas report and the “infinity model”?

Getting the right balance between affordability of marketing and aspiration is a frustrating challenge for many finance professionals. To help them, we’ve published an important new report “Return on Ideas”. What we’ve delivered isn’t theoretical or waffle. The report is packed with practical suggestions, checklists and case studies, solidly based on candid research on over 100 organisations, large and small and across industries. When we shared it in draft with a sample of CIMA members they gave it their unanimous thumbs up.

The need for this guidance paper came from joint discussions between the Chartered Institute of Management Accountants (CIMA), the Chartered Institute of Marketing (CIM) and the Direct Marketing Association (DMA). It emerged that members of all three professional bodies were concerned about the value contributed by marketing and what constitutes sound evidence about its value. Pivotal to this, they also recognised the need to drive productive teamwork between finance and marketing working together.

Finance and marketing sometimes have disjointed working relationships. They often ask different questions and they answer them in different languages. Questions that finance ask focus too much on budgets and too little on performance; and marketing focus too much on brand awareness and image and too little on sales and profit performance. Everyone retreats into their own technical jargon, each bewildering the other and wasting lots of time pursuing irrelevant questions. Ultimately any attempt at finance-marketing dialogue gets derailed.

The Infinity Model

The essence of this candid research has led to the creation of the “infinity model” – an innovative framework designed to put the finance-marketing dialogue back on the rails. Full of practical self-help exercises, questions, checklists and illustrative case study examples, the report is prescriptive about what constitutes good and bad evidence about marketing efficiency and effectiveness, and it enables managers to decide for themselves what is feasible. The model can be tailored to the needs of all types and sizes of organisation.

What we found is the best organisations have a positive creative tension between financial rigour and the marketing imagination. More specifically this involves:

• harnessing the marketing imagination to create value adding ideas
• predicting how much financial value these ideas will contribute
• delivering and demonstrating that value really was created
• establishing learning that will improve future ideas, predictions and results.

This creative tension is found in all their working practices, and these are things that any other organisation can and should copy. Managers can assess their adherence to this model by answering the questions listed in the report’s checklists.

Figure: the infinity model of marketing value creation

By adopting this double cycle, the failure rate of marketing ideas and associated waste can be reduced significantly. It can never be totally eliminated because customers are forever changeable and are never completely predictable. Good senior management accept uncertainty and risk as an innate part of marketing. They do not try to force a ‘right every time’ philosophy; instead they manage uncertainty using the best methods available.

What can companies do to put the report into practice?

A lot of progress can be made in just one day, through holding a workshop with finance and marketing. By discussing the questions listed in the report, participants can find out how they can do a better job of making marketing more efficient, effective and value adding. In the process they will start to speak a common language that focuses on performance as well as conformance.

Having a follow-up session with the managing director, or business unit heads, can be helpful too. The report sets out departmental specific questions to be answered by the key players. A common issue that such discussions can resolve occurs when business units hold the marketing purse strings, and they use the marketing department as an internal service function. All too often such expenditure is squandered on vanity projects, whose sole effect is inflation of managerial egos, without sound commercial justification.

Quick wins from these workshops can be put into practice with immediate benefits. A longer term programme of change may be identified too, and the report contains a road map to plan out this more strategic approach.

So what are the benefits?

Ten of the benefits of this are:

1. Making the marketing budget work harder
2. Holding Agencies rigorously to account for results
3. Eliminating production wastage and its causes
4. Making marketing assets and collateral (images, video, text) work harder
5. Maintaining media effectiveness while reducing costs
6. Getting Agencies to do a better job in less time
7. Avoiding surprises in budget commitments
8. Wasting less time on budgetary bureaucracy
9. Faster marketing approvals with fewer errors
10. Forecasting more accurately

Conclusions

This report is aimed at giving practical help to any organisation that has to market itself. Free to CIMA, CIM and DMA members, grab a copy of the report, read it and run a workshop. We believe this is the way of the future for responsible marketing in the 21st century.