Professor Robert Shaw discusses how organisations can ensure that their marketing continues to reap financially what it sows creatively in the current financial climate.

Marketing’s costs have long been the subject of discussion. A century ago, Lord Leverhulme, founder of Lever Bros and the first president of the Chartered Institute of Management Accountants (CIMA) said: “Half the money I spend on marketing is wasted. The trouble is I don’t know which half”. Unfortunately, finance and marketing seldom have meaningful discussions about this problem.

Finance and marketing departments sometimes have disjointed working relationships. They often ask different questions and 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

In a bid to get to the bottom of this frustrating business challenge, a new report entitled Return on Ideas has been published. 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.

The report is packed with practical suggestions, checklists and case studies, solidly based on candid research on over 100 organisations, large and small across industries.

This 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. The report is prescriptive about what constitutes good and bad evidence about marketing efficiency and effectiveness, and enables managers to decide for themselves what is feasible. The model can be tailored to the needs of all types and sizes of organisation.

The best organisations comprise 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.

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.

Putting it 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 conformity.

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.

The 10 benefits

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

Further information about the report can be found at www.return-on-ideas.com [1]

Professor Robert Shaw is Honorary Professor of Marketing Metrics at Cass Business School and Director of the Value Based Marketing Forum.