Marketing Management

If you want new business, - go and find it!

2012-01-13T11:27:00.000Z

We now live in a global market place. Historically, businesses have always had the ability to operate in foreign markets, but communications and costs have meant that comparatively few have ventured into business beyond their own locality or national borders. Modern communications and especially the internet have changed business perceptions. Companies now can and do outsource their administration wherever it may be advantageous so to do, even to the other side of the world. At the same time, businesses can now present their products and services to customers and potential clients via the internet enabling substantial businesses to be developed as mail-order via the internet in a cost effective manner that was previously impossible only twenty years ago.

Using the internet is an effective way of passive selling. It enables potential customers who know what they want, to see and access products and services displayed on web-sites. This is a great advantage for small specialist businesses which have limited markets within their home territory, allowing them to have access to specialist demand on a global scale via the internet.
While it costs relatively little to set up a web-site for goods and services, which can be enabled to be accessed throughout the world, it is not a substitute for old fashioned market and marketing research. Different countries around the world have different problems and needs. While a product may be very successful in its country of origin, because it answers specific problems, those same problems may not exist in other countries, or may not be considered sufficiently important. Similarly, there are potential customers overseas that may be unaware of the products and services available to them that would satisfy their needs. Just because a business displays its products and services on a web-site, does not make its potential markets aware of its existence. Direct advertising and promotion in other countries can make a potential market aware of a product, but unless that market has a need for that product, the investment in marketing communication will have been wasted. Ultimately, there is no substitute for old fashioned marketing research to establish the nature and level of need.
So what should be done? Why do market research, when the internet can make direct contact with potential customers?
The internet is an excellent tool, but the sources of the information are not always reliable, and the information may not be suitable for decision making. Desk research should still be the first port of call, but it is amazing that so many businesses do so little if any market research. “Reconnaissance is never wasted”, and so it is in the commercial world that research always pays dividends and saves on unnecessary costs.
The Internet is a good initial source for information about countries, needs, and existing competition, and may give indications for the direction of further research, but caution must always be exercised regarding the reliability of the accessed web-site and its information. British Chambers of Commerce are a useful source of information about foreign markets, and can provide a wealth of information from their commercial libraries. Trade associations also provide insight into other markets and the UK government provides a wealth of information and advice to would be exporters through the “UK Trade and Investment” organization.
The first questions that need to be asked are:
1. Is there a market for the product in the selected territory? How do you know?
2. How big is the market?
3. What is the size and nature of the completion?
4. Is the product suitable for the market or would it need to be adapted?
5. Are the unique selling points and branding suitable for the target market?
6. Would the market bare the extra cost of freight and transport, packaging and agent’s commission and still allow a competitive price?
7. Are there any potential trade barriers or restrictions?
A lot of in- country market research can be obtained by through the Commercial Attaché’s at the British Embassies or High commissions. Not only can the Commercial Attaché’s provide market and local information, but they are also able to find and introduce potential contacts and agents. So the executive responsible for developing business income has a number of sources for potential help in investigating and launching into new overseas markets.
Chambers of Commerce frequently organise trade missions to overseas markets, providing a cost effective way of visiting new territories as well as finding potential partners, distributors, and agents. Visiting trade shows abroad can facilitate an initial assessment of the business opportunities, as well providing an opportunity to meet potential contact and assess competition
If the market research is favourable, it will be necessary to prepare a marketing plan specifically for that area, taking into account, local values, customs, language and currencies will all impact on business activities.
There are many opportunities to develop profitable income from the global market, but businesses must be prepared to invest in some research and make the effort to find them.

© N.C.Watkis, Contract Marketing Service 13 Dec 11

Customer strategy: Contact with the enemy makes all plans obsolete!

2011-11-24T15:07:00.001Z

Defining business mission statements, strategies and objectives, is a relatively easy if at times laborious process undertaken by those in charge of getting and maintaining business income. Every year, countless books and training courses are devoted to the subject of business strategy and planning, and the training industry gains a lot of business in supplying programs to meet the needs of businesses and executives who want to understand and improve their planning process.

Unfortunately all the planning in the world does not guarantee the desired results. Carl Von Clausewitz said that in war, contact with the enemy makes all plans obsolete. Business is not war, but there is an element of truth that in the world of commerce, changing factors can soon make business plans obsolescent.

As a manager responsible for getting and maintaining business income, setting income objectives to support the overall business plan is relatively easy. However, achieving those income objectives may be easier said than done.

Assuming that a business has identified a “need” in its market; has developed a product or service that provides a solution that satisfies that “need”, and at a price that potential customers are prepared to pay, then in theory, commercial success should be assured. In reality, business is never that simple. However detailed and comprehensive business development plans may be, their success depends on in the ability and motivation of personnel to deliver the actions and results required.

Managers responsible for bringing in income to the business have to know how they are progressing in relation to their business targets. Those business targets may be financial, or related to other factors such as profitability, orders placed, new customers gained, market share, or numerous others. Measuring performance is an important factor in effective management. But performance measurement shows only what has been achieved in the past. Past performance measurements may, by extrapolation, indicate a trend in future performance, but they do not guarantee it. Achievement is produced by business leadership and effective management. But what does effective leadership and management mean in the world of business?

Leadership is essentially about encouraging others to act willingly in a particular way for a specific purpose and benefit. In business, leadership is about encouraging others to work to achieve the objectives for the benefit of the business. Management is about using resources efficiently and effectively to achieve business objectives. Leaders need not be good managers, and managers may not necessarily be good leaders.

In most businesses, “leadership” largely belongs to Chief executives, as it is their responsibility to define the objectives of the business and to inspire the willing support of the employees. However, executives responsible for getting and maintaining business income generally have to manage their staff and resources effectively, rather than provide them with leadership. The executive’s ability to motivate their staff, to maximize their efficiency and productivity, is therefore of great importance. Ensuring that what is being asked is attainable, and that sufficient resources and training have been provided will help to build necessary moral and confidence, which is especially important for staff who deal directly with customers and potential clients.

Getting the best out of people, starts with an effective coherent plan, with achievable quantified objectives. Ideally, staff should be involved in the planning procedure so that their contribution helps to develop their commitment to the objectives and actions required.

There are many books available on “management style”, all claiming to be the answer to effective management and while every book may have its merits, none can provide the perfect answer because business conditions and culture differ in every situation. However, there are principles which will help the executive responsible for producing business income, maintain the morale of employees, and motivate them to work efficiently and effectively, which include the following:
* Ensure that your own standards of conduct and performance exceed those which you set for your staff.
* Make the work important to them by telling them why it’s important to others.
* Ensure that individual responsibilities are clearly understood.
* Set agreed obtainable objectives and delegate responsibility.
* Assess performance with quantified measurements.
* Ensure that staff are provided with the resources necessary to undertake their work and achieve their objectives.
* Regularly assess individual performance, with positive and negative feedback.
* Promote their successes and minimize their failures. More is achieved by genuine encouragement and praise than by overt criticism.
* Encourage staff to be creative and to devise new ideas and methods of working.
* Having set objectives and allocated resources, leave staff to get on with their job. Be available to assist if requested, but otherwise do not interfere.
It is said that “In life, you get what you expect.” If you expect the best from your staff, and give them the proper resources and direction, they are more likely to perform at the level required of them. Confidence breeds confidence and success breeds success.

© N.C.Watkis, Contract marketing Service 22 Nov 11

LIFE CYCLES ARE NOT RESTRICTED TO PRODUCTS

2011-10-25T08:32:00.000+01:00

It is generally accepted that product and services have a “life cycle”. From the time a product or service is launched into a market, it will grow with increasing sales, before entering a period of “maturity” as its market becomes “saturated”, after which sales start to decline as demand decreases and competitive products arrive.

Product life cycles can be long or short. Some “fashionable” products may only last for a matter of weeks or months, while others may last for decades. But what is certain is that demand for any product or service is finite and at sometime or other demand for the product will be replaced by different requirement.

For the manager responsible for getting and retaining profitable income for a business, awareness of product life cycles is very important. An appreciation of where a product or service may be, in relation to its life cycle, is essential for future business planning. Can the product or service be modified to extend its life, or is it becoming obsolete owing to changing conditions or competitive technology?

Businesses exist only to make money. Making products or supplying services is only the manner in which a business produces its income. Being alert to changes in customer demand is of primary importance for the manager of income development. Internal business indicators may help to illuminate the position of a product in relation to its market, but declining sales figures can be indicative not only of a possible reduction in demand, but also of other factors including organizational inefficiencies.

While internal indicators show how the product is reacting to the market, external indicators show how the market is reacting to the product. By comparing trends in sales with those of market growth and market share, it is possible to assess whether demand for a product is increasing, maturing or is in decline. Changes in the economic climate at local, national and international level can often have direct effect on the demand for specific products and services. Proposed and actual changes in legislation may affect the nature and substance of products and services, or impinge directly on how they are delivered. Similarly, being aware of how trends in consumer fashion may ultimately affect demand, especially with fast moving consumer goods. An advance in technology may make a product obsolete overnight.

Changes in customer demand may be slow and subtle, or may be quick and direct, but for a business to be and remain successful; it needs to anticipate change before it happens. In whatever business an organization is involved, customer demand will always be evolving as needs and perceptions change. For the manager this means that looking ahead is essential, in order to be suitably prepared either to modify the product or service to meet changing needs and expectations, or to develop new products or services to be the solution to different problems.

Getting and retaining business requires many processes and actions in order to maintain the flow of necessary income. But as the economic, social, and market conditions continually change and develop, so the method by which business is secured may become less suited or inefficient to meet the prevailing commercial climate. The principle of “lifecycles” does not only apply to the product or service that produces the income, but also applies to the processes involved in getting and retaining business.

How effective is the organisation in getting business? How efficient is it in producing income? What is certain, is that in a changing world of commerce, the processes and methods used successfully yesterday, although tried and trusted, may not be as effective under today’s conditions. It is important therefore, that managers should regularly examine and question their methods and processes, to ensure that they are efficient and effective. Are the ways that are used to seek and engage customers still as effective as previously? How do you know? If the results are less than they were despite the same investment of effort, perhaps they need to be modified or adapted to meet changed conditions. Alternatively, perhaps new methods and processes need to be employed in order to develop and maintain business. Only Constant monitoring and analysis of quantified business performance indicators from both internal and external sources will enable business performance and income to be maintained and maximized.

The principle of lifecycles applies to products and services, but equally to the markets that are served and the business processes involved in satisfying customer demand.

© N.C.Watkis, Contract Marketing Service 18 Oct 11
Contract Marketing Service, (Marketing Performance Consultants)

Ignorance is no excuse

2011-09-27T10:58:00.000+01:00

In the “phone hacking scandal”, News International managers appear to have assumed that the gaoling of Goodman and Mulcaire, had ended any illegal practices amongst their staff. But did those managers make efforts to confirm that illegal practices had not only ceased but did not reappear, or did they simply assume the answer they wanted? Do you know how the law relates and affects your business practices? Do your employees know and understand how the law relates and affects their activities in getting and retaining business? How do you know?

There is so much law involved in all commercial transactions, that it has become a veritable minefield for the unwary manager responsible for getting and maintaining business. Although buyers and sellers should be free to engage in business as they please, the law is there to make a reliable framework in which business may be transacted for their mutual benefit. Many managers would consider that they know how the law affects their business activities, but this is potentially a dangerous assumption. Not only should a manager responsible for producing the income of the business be aware of all the laws that affect that process, but they also need to ensure that employees and contractors are equally aware of the relevant regulations that impinge on their actions.

While managers responsible for getting and retaining business may not be responsible for the manufacture of the product that they sell, they need to be aware of the law relating to their business. Legal regulation may relate to the sourcing and use of material, or in the case of the food industry a whole specialist area of food and hygiene regulations. Any transgression of legal regulation in the production area could result in the interruption of product supply, and damage to the reputation and image of the business. In the food industry, any failure under food and hygiene can have catastrophic results for the producer, especially if they are a small business. Similarly, managers need to be aware of legislation relating to product labelling as well as how the Health and Safety of the product might affect the customer.

Legislation also affects how products are presented to the marketplace, regarding the type and material of packaging used, and its future disposal. But probably the biggest areas for potential legal problems lie in advertising, promotion and customer relations.

In Britain, while standards in advertising are policed by the Advertising Standards Authority, much of the legislation regarding advertising relates to specific product groups such as alcohol tobacco and financial services. But when trading in other countries, it is important to be aware of the legal practices and constraints which may be very different from those in Britain.

With many businesses operating via the internet, using “social marketing” tools, as well as more traditional methods such as direct mail, many businesses will have amassed a considerable amount of customer information. All such data and information is likely to be covered by the Data Protection Act, regarding its storage, security, and access. Infringement of the Act can result in a criminal prosecution and fine.

Two recent acts of Parliament may set considerable and expensive traps for the unwary; the
new Bribery Act of 2010, and the Olympic 2012 Act.

While there have been anti corruption laws in Britain since the 1880’s, the new Bribery Act of 2010 is far reaching. The Act makes companies liable for the actions of their employees as well as agents and intermediaries worldwide, even if none of its employees knew about bribes being paid out on its behalf by an associated person. The company's only defence is to show that it had 'adequate' anti-corruption procedures to prevent bribery. Companies will have to have clear policies regarding gifts and corporate hospitality, both of which will have to be carefully controlled. Meanwhile the Olympic Act which is set up to protect corporate sponsorship, severely limits non sponsoring businesses using the Games to further their business. The Act means that for a business, even using the words, Games, medals, gold, 2012, sponsor and summer which while innocuous in themselves, if combined in any form of advertising could result in a statutory £20000 fine.

Managers responsible for getting and maintaining business income must be aware that they will be held responsible for the manner and process of obtaining business, regardless of the level of their involvement. Managers in such positions would be wise to elicit a survey to cover all their activities involved in getting and maintaining business income, to ensure that all their procedures and products meet legal requirements and to identify any weaknesses where legal problems may arise. If the company has its own lawyers then it should be dealt with internally, otherwise external help should be sought. Having established in detail, the legal framework in which the business operates, the manager must ensure that all staffs involved in getting and retaining business income are aware of how the law affects their work and operation, perhaps with the provision of a relevant checklist or aide-memoire.

When things go wrong, managers must be prepared. Ignorance of the law is no excuse, neither is turning a blind eye to illegal or unacceptable practices. By keeping abreast of relevant law and ensuring that employees and contractors are fully aware of their legal responsibilities, managers will have a strong defence for themselves and their employers should the worst happen. When managers fail to be aware of the legal obligations in getting and maintaining business, the results can be seriously damaging to the business its brands and workforce, and in the most serious cases may, like the News of the World. force the closure of the business,

© N.C.Watkis, Contract Marketing Service 06 Sep 11
Contract Marketing Service, (Marketing Performance Consultants)

Ignorance is no excuse

2011-09-27T10:43:00.000+01:00

It is easier to lose business than to get it

2011-08-15T16:28:00.000+01:00

Businesses are not philanthropic institutions: they exist to make money in the form of profit. To make money businesses have to anticipate and satisfy customer’s demands, so that customers provide the necessary income to the business in return for the goods or services that they require. Identifying enough potential customers who have the requirement for the goods and services on offer, is the primary problem for every business. Having identified the potential customers, the next difficulty is to convert them into customers that pay for their goods and services.

It often costs businesses more than they realize in order to gain a new customer – and considerably more than it does to retain them, so it is surprising how businesses can often take a casual attitude to their customer relations and to retaining customers for their repeat business. Gaining and retaining customers is a privilege not a right. Customers don’t have to give their business and they are not obliged to remain customers, especially if the marketplace is filled with competing offers for products and services.

Providing special offers may help to maintain customer loyalty in the short term. Money off vouchers and other incentives in the world of consumer sales may help to maintain repeat purchases, but it can be a two edged sword, especially if special offers, gifts and discounts are perpetuated. If incentives are perceived by the customer to have become the normal result of their purchase, it becomes difficult for a business to discontinue them without harming their image in the eyes of their customers. In that case the incentive has ceased to be a reward or encouragement, but has become part of the product/ service package, and must be costed and treated accordingly.

Maintaining customers depends largely on how the product or service is delivered. As a minimum standard customers should always receive their goods and services at the price agreed and delivered in the manner and time expected. This is certainly the case in business to business transactions, where delivery to price and specification have particular importance to companies involved in manufacturing, or where their supplies inventories work on “just in time” deliveries.

From time to time, mistakes will be made; - products may fail to meet their specification, deliveries are incorrect or are late, or perhaps there are mistakes in the invoicing.
When a customer complains, the customer is not always right. But customer complaints need initially to be treated in the first place, as if the customer were right. It is easy for some employees not directly involved with the customer to treat such complaints as a nuisance, but complaints are a valuable source of information about how customers perceive the product and service for which they are paying.

It is all too easy for employees not directly in contact with the customer to be unaware of how their actions can alienate both potential and existing customers; for example a delivery not being made on time, a credit level exceeded that prevents delivery, incomplete orders.
When such events occur, provided that customers are informed of the problem at the earliest opportunity and kept informed about progress to its resolution, the harm to customer relations will be minimized. The worst situation is to not inform the customer of any problem, but allow the customer to find out the hard way, which may create problems for the customer, and breaks the trust of reliability between the customer and supplier.

For managers responsible for getting and retaining business, it is important to ensure that all employees understand that however remote their jobs appear to be from a direct relationship with the customers, their actions can have a significant role in the acquisition, retention or loss of a customer’s business. Getting customers and retaining their custom is hard work which can easily be undone and negated by others who don’t appreciate the consequences foreseen or unforeseen of their activity or lack of it.

If a customer complains, and there is shown to be a problem, the first action is to admit it to the customer and apologise. It is the job of the manager responsible for getting and retaining business to investigate the complaint, its possible causes, and to provide a swift remedy for the problem. In doing so, managers should consider the following principals:

* Don’t assume that approved business procedures are followed, always check.
* Can procedures and policy it be verified?
* How do you know?

Managers who are responsible for getting and retaining business, must take ultimate responsibility when customers are lost through failings of company staff. Managers must check that the policies, procedures and results are maintained by their employees, and be ready to help when foreseen and unforeseen problems arise that effect the customers. All businesses make mistakes, but how those mistakes are handled may often decide whether the business retains or loses its customers.

© N.C.Watkis, Contract Marketing Service 02 Aug 11
Contract Marketing Service, (Marketing Performance Consultants)

How well do you understand your business?

2011-07-15T13:49:00.000+01:00

What do you know about your business? More importantly, what do you know about getting and retaining the business that produces the income for your company? The initial answers will often be “no one knows our business better that we do “– but is that a satisfactory answer? How do you know? Does your knowledge of your customers and your own business organization and methods bear close examination?

For those responsible for maintaining and developing the financial income of any business, the efficiency of getting and maintaining business and a full understanding of the process is all important. So, how should this be attained?

Research is the obvious process for obtaining information to establish a clear understanding of the business environment and current customers. But the validity of the knowledge obtained will be dependent on the nature of the questions asked, of whom they are asked, and who asked the questions.
Managers need to be clear about what they know, with certainty and evidence, and what they think they know, especially where “facts and opinions” are taken for granted. To paraphrase Donald Rumsfeld, in business, there are the things we know, the things we don’t know and the things that we don’t know that we don’t know, - i.e. those aspects of the business and market of which we are unaware.

Effective management derives from making assessments of conditions and evidence, then framing decisions and actions. To do this it is important to have as complete an understanding as possible regarding how the business operates in finding and serving its customers and how much is really understood about its own business operations in getting and retaining customers and profitable business.

Is the management of all those resources involved in getting and maintaining the necessary income for the business efficient and effective? How do you know? Performance, whether by an organization or individual, may only really be measured by their results in comparison to those planned. Many businesses still plan on the basis of making a percentage increase in sales income with little regard to market condition, or the efficiency or effectiveness of their organization in producing income or profit. Business development planning is essential for every business, but it must be based on quantifiable objectives and not qualitative statements and ideals. Management achievement may then be compared with that which was planned.

Effective business development planning should be about balancing the resources and investment available, with the potential revenue opportunity. Embarking on a selling exercise which produces orders in excess of what the business is able to produce has the potential to be seriously damaging to the business. An inability to fulfil customer orders may have long term damaging effect on the company reputation and future business. Similarly, the requirement to fund unplanned expansion to meet unexpected demand could undermine the business financially.

All business planning should show what money is to be spent and where, and to what effect, so that all planned actions should have clear and quantifiable deliverables.
Most importantly, Business development plans require some prime objectives on which the plan is based together with a time table for their achievement. In addition those plans should include detailed contingency actions if the prime objectives have not been achieved by the target date. Successful managers cannot afford to wait for “something to turn up” if specific objectives are not fulfilled on time and must be able to enact a “plan B” immediately and smoothly, to replace unachieved income.

Understanding the requirements of both the existing and potential customer base is very important. A clear understanding of each customer’s business may reveal existing and potential opportunities to resolve their problems and increase sales. An analysis of sales by product or service, according to market segment and application can help to show how the customer base both purchases and uses the product. Regular customer surveys also help to show how product and services are perceived and received, which may bring to light weaknesses in the product and especially in customer service. Having a clear understanding of the customer base in terms of its trade or industry, its geographical distribution, and cost per sale can help in the effective management of order size and customer credit requirements.

Managers cannot know too much about how their business actually works. Effective Business decisions should only be based on quantifiable evidence. Managers must be clear about what they know about their own business, their competition, and especially their customers, but they also need be clear about what things they don’t know, and not make decisions based on unqualified assumptions. It is not just what you know, but what you don’t know which determines how well you understand your business.

© N.C.Watkis, Contract Marketing Service 06 Jul 11
Contract marketing Service, (Marketing Performance Consultants)

Managers have to manage; they don’t need to be creative.

2011-06-13T12:14:00.002+01:00

Every commercial business started as an idea for the purpose of making money. Successful entrepreneurs are good at identifying problems of society and individuals; seeing opportunities to make money by finding solutions which induce customers to buy, in order to relieve their discomfort.

Seeing and recognising an opportunity may be the spark of an idea that creates a business, but in order to start, every business needs some initial capital. Income is not produced without the investment of labour or money, and usually requires both. Getting business costs money, and maintaining that business also costs money – you don’t get something for nothing.

Businesses exist to make money, which is produced as a result of satisfying customer demand. Satisfying customer demand requires knowledge of the customer and their problems, the production of a solution to those problems and the ability to convey that solution to the customer so that they are willing to accept and pay for it. The procedure described may seem simple enough, but on examination it is frequently more complex, because it requires the use of many resources and activities, even for a small business.

If a business is to make money, it requires the effective management of all those resources and the necessary assets involved in producing and delivering a product or service to a customer. But what are these resources and assets? Generally, those resources are defined in financial terms as the money allocated to budgets for the specific activities involved directly or indirectly with producing income. Tangible assets involved in getting and maintaining income are usually limited to wholly owned and dedicated IT hardware related to the administration of selling, and wholly owned business vehicles dedicated to customer liaison and delivery.

Businesses are traditionally organized into separate areas of responsibility. In manufacturing businesses, organizations tend to be formed on the basis of finance, personnel, production and sales, while retail and service businesses tend to organize around finance, personnel, and sales functions. While this sort of organization is understandable it tends to encourage blinkered and protective thinking amongst those who manage these separate areas, rather than integrated management for the benefit of the whole business.

Business activities can be divided into those which support the delivery of the product or service to the customer, and those which provide the necessary resources for the business.
In recent years it has become fashionable to declare that the customer is at the “centre of the business” without really defining what this means. Customers provide the income on which the business survives. However, every activity which directly or indirectly helps to satisfy the customer’s requirement creates a cost that is necessary for the production of income. Customer related activities include research, product or service development, advertising, sales, promotion, delivery, as well as credit control, amongst others. Those activities that provide the necessary resources to enable the satisfaction of customer requirements include finance, personnel, and purchasing.

Logically, it follows that rather than the traditional organization previously described, business functions ought to be organized according to whether they are parts of the business operations that are involved in producing income, or supportive functions that are involved in the provision of necessary resources. Business organizations could then be organized into two distinct areas; Operations, which are customer related, and Support, involved in resource provision. Being responsible for those activities which ultimately generate income, the function of business operations ought to be seen the driving force of every business, and should be managed accordingly. Thus all the activities of business operations ought to be managed as a single area with one manager having overall responsibility for the getting and maintaining the necessary level of financial income.

While producing suitable products and services to meet customer demand always requires creativity and imagination, managers of business operations need primarily to be effective and efficient managers, rather than being creative themselves. As effective managers they have a responsibility to encourage, direct and manage those with the necessary creative talents who are often less suited to management tasks. Financially literacy is also essential for efficient management, in order to understand the costs of income generation. As executives responsible for generating income, managers of business operations should be judged on the amount of money produced and their financial efficiency in its production. While brand awareness and market share may have their importance, only sustainable profitable income provides businesses with long term viability, and their employees and shareholders with a future.

© N.C.Watkis, Contract Marketing Service 07 Jun 11
Contract marketing Service, (Marketing Performance Consultants)

To Lead or Manage, - that is the question.?

2011-05-16T14:18:00.001+01:00

Government organizations local and national spend a lot of money on leadership training, aping so it seems what is done in business. But it is clear from repeated reports from the National Audit Office, that both at national and government level money is frequently wasted through bad organization and decision making. This suggests that for all the money spent on leadership training, the problem of waste and poor decision making lies in poor management. Leadership and management are not the same, and training in leadership will not produce good managers or management practise.

In the continuing search for some “holy grail” for business success, there has emerged what may be described as the cult of business leadership, which has developed into an industry of leadership training and coaching.

A report on the training market by Keynote, published last year estimates that the amount spent on off-the-job training by UK private and public sector employers was £19.39bn in the year ending April 2010 including around £2.5bn spent on external trainers. Whilst there is no known information on the type of training being bought by UK businesses, it is considered that from the prominence given to leadership training in training providers’ portfolios, that the amount spent on it must be substantial.

For the training and consultancy industry, leadership provides a new opportunity. For like every other business, training providers are not philanthropic institutions, but businesses whose sole purpose is to make money. Training companies and consultants are adept at producing packages to meet the “training need” as perceived by the market, regardless whether the need is real or imaginary.

What is surprising, is that so many business executives appear so gullible to believe that there really is a “magic button” which guarantees business success and that expensive training courses will enable them to access it. Executives who run successful businesses ought to be able to assess whether a training course enables them to do something that they previously could not, or is merely extolling a fashionable business philosophy.
Why has “leadership” become so important to business success? Certainly leadership has an importance, but to what extent does it really affect business success? Leadership in business is often expressed in the form of “Leadership Strategies”, as variously described by business psychologists. But leadership and management are two different things. There are good leaders who are poor managers and good managers who are poor leaders.
Where is the evidence that training in “business leadership,” actually improves business performance? Inspiring people with “vision statements” and other leadership ideas will not achieve the financial objectives of the business, only the effective management of resources and the motivation of the workforce will ensure success. The cult of leadership in business seems to have more to do with vanity than developing business efficiency. Peter Drucker said “the business world doesn’t need leaders. It needs managers “— people who can actually manage a team of people.”
The principles of leadership derive from military thinking and practice, where its purpose is to instil confidence and direct troops in extreme circumstances of life and death, inspiring them to do things that in normal circumstances they would not do; - such conditions do not exist in business. So is this “leadership” approach sensible in the commercial world, where there is no life or death struggle, only the need to produce profit from a stream of profitable income for the long term future of the business?

Employees are not generally interested in “gimcrack” leadership theories. As the workforce that drives the business, their interest is that the business should exist for the long-term in order to provide them with reliable income, as well as the opportunity to develop their careers, dreams and aspirations. To that end they rely on successful management to provide them with the training they need to do the job, confidence in a product to sell that the customer wants, together with the knowledge that with the right management they can produce the level of profitable income that will guarantee the future of the business for the long term and the future employment on which they rely.

The most important activity of any business is to maintain and develop profitable income for the long-term future of the business and the security of its employees and investors, so all other business activities should support directly or indirectly this activity. Therefore, the most important activity in any business is to manage the resources effectively to maximize the amount of profitable income for the long term future of the business, and minimize the use of assets and investment.
In the world of commerce, businesses are there to produce income. That income is produced by a workforce that understands what its customers want and need, and which seeks to provide a solution that those customers will buy, thus converting their product or service into the cash which the business requires. To do this successfully, a workforce needs to be properly trained in how to achieve the result, have the necessary equipment, have confidence in their product and its delivery, and be properly motivated, directed and remunerated. All this requires effective management of personnel and resources. Leadership may inspire, but it is only effective management which gets things done and ultimately produces income.
* * *
© N.C.Watkis, Contract Marketing Service 27 Apr 11
Contract Marketing Service, (Marketing Performance Consultants)
Nicholas Watkis is a Fellow of the Chartered Institute of Marketing, and a member of the Institute of Consultancy

“If you are not in business for profit or fun why are you here?”

2011-04-07T11:12:00.000+01:00

“Up the Organization” written in 1970 by Robert Townshend the then chairman of Avis Rental cars, was a worldwide best seller. Townshend analysed and commented on the structure and organization of businesses and its operation in a humorous and anarchic manner, but also showed how he had organized and managed Avis in ways that appeared radically different from the accepted business norm.

Re reading the book shows how much in business is the same, despite computerization,
e-mail and the internet, and much of his observations and maxims are still valid. Why? Because business is run by and for people, and people do not change in their motivations, habits, prejudices ambitions and fears.

The structure and organization of most businesses probably may not have changed much in more than a century. The organizations of Small and Medium sized Enterprises (SMEs) are probably the most efficient, because they have to be flexible to adapt to circumstance and they have no “slack” in the system. While people in SMEs have specific job responsibilities, they also work closely together to get the job done. In SMEs, people tend to be more aware of the need to get and retain customers to produce the income for the business which pays their wages.

As company workforces increase, so there is a tendency towards a bureaucracy of little empires, with all that that entails. But bureaucracies create inefficiencies, increase cost, reduce profits, and cause employees to lose sight of the purpose of the business which is to produce money. This in turn leads to the workforce becoming more remote from the customer who provides the money on which the organization survives.

Since the early 1970s, probably the most important person in a company next to the chief executive has been, and generally still is, the financial director. While financial management is vitally important, balancing the books does not make income. Finance is simply a resource that enables business and income production to take place.

Next to them in recent years, thanks to layers of employment and health and safety legislation, have been the company secretary and the director of personnel, now called human resources. Yet none of these executives is responsible for producing the income on which the business and ultimately their jobs survive.

If businesses are about making money, then the process of producing income should be central to those organizations. Instead, many businesses give the impression of being organized as a series of largely unrelated activities with the purpose of producing a product and retaining a structure, rather than producing profitable income efficiently. Many companies could still be considered to be product orientated while others might claim that they are customer oriented, in order as Tom Peters said, to “Delight the customer”. Such sentiment is all very commendable and quite important, but does not in itself produce the continuous profitable income for the long term future of the company

Businesses are there to make money, which is why they were set up. They are not there to make products or, strangely enough, to satisfy customers. Satisfying customers is only a means to an end to produce profitable income for the benefit of shareholders and employees.

In nearly every business organization, the management structure illustrates what they do, but not what they contribute. Thus businesses have separate departments of production, finance, purchasing, personnel and sales. Each department tends to develop a silo mentality where it relates to its own limited objectives. Production seeks to maximize production, sales seek to maximize the volume sold finance seeks to balance the books, but who is responsible for producing profitable income?

If businesses want to become more efficient at producing profitable income, then producing sustainable profitable income for the long term, must be the foundation of their organization and management.. One option would be to reorganize the business structure into two management areas, Business Operations and Business Support. All the activities that directly and indirectly produce income – production, research, development, and sales, would be subsumed into a Business Operations area. Finance, purchasing and personnel and all the other activities which provide the necessary resources for the Business Operations area, would be subsumed into a Business Support area. Dividing a business organization into management areas of operations and support, would enable better integration of those activities which directly and indirectly contribute to producing profitable income by satisfying customer requirements. At the same time, by integrating finance, purchasing and personnel under one management area of Business Support, employees would have a clearer role in supporting the Business Operations area, which produces the income on which the future of the business and their employment depends.

If maximizing profitable income is the primary purpose of every business, then businesses ought to be organised, structured and managed, accordingly.

© N.C.Watkis, Contract Marketing Service 31 Mar 11
Contract Marketing Service, (Profit Development Specialists)

Marketing isn’t war, its management

2011-03-15T11:50:00.000Z

There have been a number of books in recent years suggesting that successful business is like warfare, e.g. Mark McNeilly’s “Sun Tzu and the Art of Business,” and likening business leaders to successful generals. But while both business and warfare require leadership, the type of leadership required is very different. Leadership in battle takes place in extreme conditions, but leadership in business and commerce is not a life or death struggle.

However, successful businesses and successful military campaigns do have two things in common. Both require their leadership to select and maintain an aim. They also require the maintenance of morale amongst those who are to achieve the aim. Leadership provides the inspiration and direction but management provides the means of attainment.

While some think “marketing” is another name for promotion and communication,
The Chartered Institute of Marketing defines the word as “The management process responsible for identifying, anticipating and satisfying customer requirements profitably”. It makes it quite clear that while the purpose of marketing is to produce profitable income, by satisfying customers, the nature of marketing is one of management. Thus successful marketing is about the efficient and effective management of investment and resources to produce profitable income by anticipating and satisfying customer demand.

So how should marketers go about managing their assets and investments to produce profitable income? Peter Drucker said that “if you can’t measure it you can’t manage it.” While this statement may perhaps be simplistic; for those whose responsibility is producing income, then the demonstration of effective management will require quantifiable measurements of “inputs” and “outputs”. In other words, effective marketing requires the measurement of those activities which directly or indirectly produce income, together with the amount of income produced

In small and medium sized enterprises (SMEs), those responsible for producing the income may have very few staff, other than those employed in selling and sales administration. However marketers may be termed, whether sales manager, sales and marketing manager, or marketing manager, they may often have sole responsibility, with minimal assistance, for all the specialist areas of marketing, such as research, communications and customer relations. Marketers in small companies are usually fully occupied having to be involved in all the activities which assist directly and indirectly with producing income. Thus because few people are involved in marketing in SMEs, marketing can be more effectively controlled.

In larger businesses, where there are specialist marketing staffs, management becomes more of a problem. While marketing is about the effective management of assets and investment to produce profitable income, it also requires the effective management and motivation of people. Since Marketing has always attracted creative people, who generally do not like to be constrained by quantified objectives or performance measurement, their effective management can be difficult.

Until the advent of the desk top computer, virtually all businesses were managed through manual data systems and processes. To produce a sales forecast could take days of work, marketing and business plans could take weeks or months to prepare, and be obsolescent by the time they were complete. However, the developments in computer based automation have revolutionized business operations especially in marketing organizations. Those activities that previously took days or weeks to prepare are now done in hours or minutes. Where does that leave the marketing specialist? For the executive responsible for managing marketing resources the question must be, what do the people involved in the marketing department do that contributes to producing sustainable profitable income for the long term? How are they employed? Is their time used efficiently and effectively? Because so many activities are automated, are they fully occupied? What do they do all day? How do we know?

One thing that the executive responsible for managing the marketing staff should do is to establish exactly the detail of each employee’s job. This can be done by getting them to write their own job descriptions, detailing all the activities for which they believe they have responsibility, and which they actually carry out. Making a comparison of their own job descriptions with their official descriptions can make interesting reading, as it will highlight job overlaps, mistaken authority, and gaps in performance and responsibilities. By ensuring that all staffs have clear job descriptions and objectives to achieve, managers have better control over all their resources.

Although marketing specialisms cannot easily be quantified in their direct contribution to income production, marketing managers must demonstrate the efficiency and effectiveness of their specialist staffs with quantified performance data. Both marketers and marketing organizations must justify their existence as well as their use of assets and investment. Those that fail to demonstrate their contribution and efficiency are likely to find that they are surplus to requirements.

Analysis of what is done by marketers and how they do it may invite radical change. While technological change has produced innovative ways to communicate with potential and existing customers, as well as produce market research, marketers must expect that similar changes to working methods and organization are inevitable. Regardless of whether a company is large or small, their aim is to produce money, not just for shareholders but to benefit employees and invest for the long term future.

If “marketing” is really about managing resources to produce profitable income, then the executives responsible need to become effective managers. Effective marketing management requires quantifiable performance measurement, with the ability to motivate specialist staffs to efficiently contribute to producing profitable income, for the future of the business.

© N.C.Watkis, Contract marketing Service 28 Feb 11

Cash flow is king

2011-02-17T12:43:00.000Z

When considering any business, the two principle documents which are consulted are the Balance Sheet and the Profit and Loss account. These two documents give a thumbnail sketch of the business operations, in terms of its trading results and its general solvency. However, neither of these documents tells the reader how good the organization is at getting and maintaining its profitable income.

If “marketing” is defined as “The management process responsible for identifying, anticipating and satisfying customer requirements profitably”, then “marketing “ is the management process responsible for producing sustainable profitable income for the long term future of the business. The efficiency and effectiveness of marketing management is therefore of crucial importance so that measurements of marketing performance ought to be seen in the Profit and Loss account, balance sheet or somewhere else, but they aren’t...

Marketing practitioners frequently talk about “adding value” to the business, without defining what that “value” is. Is “brand value” any more relevant than “goodwill” in a balance sheet as neither are tangible assets? Strong brand names do not guarantee the survival of a business. In the airline industry, TWA and PanAM, were not only considered world famous companies but as “brands” in themselves. But however valuable the names may have seemed, it did not stop either of them being liquidated and the names going to oblivion.

While “brand image” may help to condition the prospective customer, it does not make money or produce cash flow. Logos may visually help to identify a brand, and provide recognition for the customer but they are costly to change, and do not add to business income. While logos may have some importance in the world of fast moving consumer good, as product identifier, they have little relevance in the business to business sector.

Whether a business is large or small, its long term future will depend on the amount of income it makes and the amount of profit it retains. Brand names and logos may help to produce the image of a product or service, but it is the managers of “marketing” who have the responsibility for producing profitable income. As managers, their performance should be measured on the amount of profitable income they produce, not on the questionable value of an intangible asset such as a brand name.

For large companies the balance sheet is of major significance in that it shows its solvency in its ability to pay creditors from its assets if the need should arise. For smaller companies, especially those started within the last twenty years or so, the balance sheet has less importance, because many will have minimal assets. The nature of the modern office and IT equipment means that it is often more economically attractive to lease offices and equipment rather than buy them which reduces the asset value on the balance sheet. In addition, leasing contracts often have the attraction of providing for regular updating of equipment, thus avoiding problems of equipment obsolescence and disposal. For most small and medium sized businesses, the profit and loss account with its ability to monitor the cash flow for the business, has greater importance than the balance sheet. Maintenance of cash flow is therefore one of the primary responsibilities of the marketer, who will need to manage a number of factors that affect it, including:

1. Number of enquires
2. Conversion rate of enquires to order
3. Total Value of orders
4. Cost of processing orders through to delivery
5. Credit days allowed before payment
6. Amount of credit days from suppliers
7. Volume and value of bad debts.

In order to improve cash flow marketers need to seek ways to:
1. Increase suitably qualified enquires
2. Improve conversion rates
3. Increase order size in order to increase income value and reduce processing costs.
4. Reduce credit days by early settlement discounts or other incentives.
5. Maximize credit with suppliers.
6. Minimize the cost of sales calls and customer contact without damaging the customer relationship.

Managers of “marketing” will have specific interest in both the “Balance Sheet” and the “Profit and Loss account”. While in some large businesses, managers of “marketing” may be involved in building the “value” of their Brands as intangible assets, the main responsibility for all such managers in both large and small businesses remains the maximizing profitable income for their long term future, with the minimum use of assets and investment. In reality the performance of managers of marketing will be measured on to their contribution to the Profit and Loss account of their respective businesses, in terms of the amount of profitable income produce they produce and the efficiency with which they produce it, rather than on a “brand valuation” on the Balance Sheet.

© N.C.Watkis, Contract Marketing Service 04 Feb 11

Mumbo Jumbo damages marketing credibility

2011-01-25T12:25:00.000Z

Recent papers published during this year by the Chartered Institute of Marketing (CIM) and its respective publishing partners, Deloittes and Accenture, make interesting reading.

The papers “The Future of Marketing Capability” and “Improving Marketing Effectiveness” appear to concentrate on the problems of marketing accountability and the perceived relevance at board level for strategic planning. Yet another publication, “In Search of Strategic Marketing,” published by the CIM and Accenture claimed research with leading marketing heads of 50 major international businesses, representing some 16000 marketing practitioners in the development of its findings.

Important as these reports may be, one is struck by the relevance or otherwise that they have to the majority involved in marketing. According to statistics for 2008 from the UK Office of National Statistics, small and medium sized enterprises (SMEs) with fewer than 50 employees made up 98% of all registered business enterprises, while companies with over 250 employees made up just 0.4% of all business enterprises. Thus these three publications would appear to be relevant to perhaps just 0.4% of all registered business enterprises.

From these statistics it would seem that the majority of marketing practitioners are probably employed in the 98% of registered businesses known as SMEs. Within SMEs, marketers are more likely to be involved in all aspects involved in getting and maintaining business, as the nature of SME organization does not generally allow for the development of wholly separate functional departments. Whereas in large organizations, the marketing function may be a wholly separate department which may or may not include selling. Thus in the SME sector, marketers may have a broader responsibilities, with greater direct involvement in overall business planning than their counter-parts in large companies.

The sole purpose of every commercial business is to make money; commercial businesses exist for no other reason. Responsibility for producing the income is therefore the most important activity of any business.

Marketing as defined by the Chartered Institute of Marketing is “the management process of anticipating and satisfying customer demand profitably.” Given that the purpose of every business enterprise is to make money, perhaps the emphasis of the CIM’s definition should be changed to read that “marketing” is the management process that produces sustainable profitable income, by anticipating and satisfying customer demand. The purpose of marketing is therefore the production of profitable income for the long term future of the business.

Over recent years there has been a concentration by marketers on the needs of the customer, and for making businesses customer orientated. In many ways this is understandable, but while the “customer is king” is a laudable business statement, the fact is that the purpose of effective marketing is to produce profitable income and not the satisfaction of customers. The anticipation and satisfaction of customer demand is only the manner by which income is achieved.

Judging from the new CIM White paper, “The Future of Marketing Capability” perhaps it is time for marketers to define their activities and how they are relevant to a business. Is their purpose to produce sustainable profitable income for the future of their business, or do they consider that their prime activity is the development of strategy, brand development and “value”, however that may be defined?.

Many recent academic reports and papers give the impression that marketers appear to spend a lot of time “navel gazing” on the importance of “marketing” and the need to explain its benefits in brand image, “value” and market share. While brand , value, CRM, and advertising, have their importance, they can be a convenient diversion from the hard fact of producing sustainable long term profitable income. What senior management need to know is, how much profitable income has been produced what it cost to produce, and how the income may be maintained? For marketers involved in SMEs, answers to these questions have immediate importance. Developing “marketing strategies” may sound important, but unless the strategies are turned into specific attainable objectives, with a clear action plan for their achievement and measureable results, the actual contribution to the business is negligible.

Marketers who have the responsibility to produce the income for the business by anticipating and satisfying customer demand, and wish to be taken seriously at senior management and board level, may have to eschew the term “marketing” altogether. Marketers aspiring to senior management must be seen as managers of income production and trade development, by conducting their business with performance measurement and quantifiable results, while communicating in clear English, rather than “marketing and business speak”

Marketers claim that they want recognition and to be an influence to senior management and board members, yet they seem incapable of expressing themselves in plain English. So much of this type of writing seems to be on the premise of “bullshit baffles brains”, yet it makes one suspicious that behind the “smoke and mirrors” of this impenetrable language, there is very little substance, and that this would be highlighted if it were written in “Plain English”.

The document “The Future of Marketing Capability” is a case in point. If it is an important document why do the authors make it so difficult to understand? Written as it is in a columnar format and published on the web in PDF, its format is wholly unsuitable for on screen reading requiring constant page movements up and down, making it difficult to follow and read. The report also seems to be incapable of using plain English. Every opportunity is made to use jargon, and “marketing and business speak”. Perhaps the writers believe that it is fashionable and adds to their credibility in the closed world of marketers, but in the open world of business decision makers, such writing is easily dismissed because it obscures meaning as well as relevance and credibility with readers. Marketing practitioners who indulge in writing reports in similar “mumbo jumbo”, damage the credibility of their profession, thus potentially barring their involvement at board level decision making.

If the “smoke and mirrors” effect that results from the use of “marketing” language, as demonstrated in these reports, has produced the image which excludes marketers from senior management and the boardroom, then marketers have only themselves to blame.

© N.C.Watkis, Contract Marketing Service 30 Dec 10

Can marketers game the system?

2010-12-06T12:51:00.000Z

Both the marketing press and academia appear to concentrate on the marketing structures and organizations of larger companies, rather than that of small and medium sized enterprises (SMEs).

According to statistics for 2008 from the UK Office of National Statistics, SMEs with fewer than 50 employees made up 98% of all registered business enterprises, while companies with over 250 employees made up just 0.4% of all business enterprises. Marketers responsible for getting and retaining business will tell you that it is hard work, especially if they are employed in an SME. In most SMEs, marketers will not have the luxury of marketing departments supporting them, but if they have responsibility for getting and maintaining income, they will have to be masters of many disciplines, unless those disciplines can be sub-contracted. In such circumstances, the marketer may be directly involved in all the specialist disciplines, including selling and negotiations. What is certain is that the performance of the marketer working in an SME can be directly measured in terms of the sustainable profitable revenue that is produced and the costs and investment required producing it. In most SMEs, every penny counts, so marketers have to be clear about what they do, how they do it, what it costs and how much money they contribute.

However in larger firms, the responsibilities and accountability of marketers can be quite different. In these firms and organizations, the marketing department can be a place where some people build successful careers by developing their own image, but potentially wasting time and money by avoiding the scrutiny and the quantified measurement of their their real contribution. How do they do it?

There are still many marketers who while publically agreeing that marketing performance should be measureable, privately consider marketing to be an art that does not lend itself to meaningful measurement and will do their upmost to ensure that it stays that way.

The enthusiastic pursuance of various marketing fads, such as unsuitable CRM packages, ventures into “Total Quality Marketing,” or unnecessary and expensive re-branding exercises that do nothing to increase income, but add substantially to costs, are just some the activities where time and money is wasted . These activities may be summed up in the term “Gaming the system”.

“Gaming the system” is a term that refers to the way people in organizations will, if allowed to, operate the corporate organization to their own advantage, rather than to the advantage or objectives of the organization in which they are employed. Gaming the system can operate in all aspects of an organization, and is the result of weak management.

How do Marketers “Game the System”? There are many ways, often related to “visionary ideas” that do not relate to the purpose of producing sustainable profitable revenue, either in the present or the future. Here are just a few:

* Maintaining the idea that marketing and sales are two different disciplines, rather than accepting sales as being that integral part of the marketing function, which is directly concerned with customer satisfaction and income production.

* By eschewing responsibility of sales, marketers can avoid being accountable for income generation.

* By pretending that marketing is a strategic expense without which a company withers and dies, rather than in the management process that that requires investment to produce sustainable profitable income by identifying, anticipating and satisfying customer demand.

* When sales go up, claiming that it was the money spent on advertising and communications that produced the increase in sales. Alternatively, when sales go down, claiming that without advertising and communication, sales would have been worse. Since in most cases the effect of advertising and promotional activity can rarely be quantified accurately, these views are difficult to contradict.

* By ensuring that all reports are written with the latest jargon and “business speak” in order to confuse the reader and disguise the paucity of the argument.

* By convincing the company that its future development depends on a large budget to “invest” in a new corporate image, logo and vision statement, all of which are expensive, but not necessarily contributively to producing profitable revenue

* Ensuring that all performance measurements are based on activity not results, thus avoiding any performance measurement that would allow management to assess the overall contribution in a quantified manner. Defending the need for large budgets, but ignoring the need to quantify the resulting contribution.

It is very easy for marketers to spend money to develop brand, market share and customer relations, but it is much harder to demonstrate directly how such investment contributes to producing profitable income. “System gamers” may have no difficulty in demonstrating what and where they have spent money, but justifying what was spent, in the amount of profitable income produced may be a lot harder.

“Gaming the system” works contrary to the business interests of a firm, because it wastes time and investment. Therefore recognizing how “Gaming the system” can manifest itself in marketing organizations is important, if management are to effectively counter its effects. To do this,
managers responsible for getting and retaining business need to;

* Accept that getting and retaining business costs money and therefore all investment, costs and assets must be used efficiently and effectively

* Ensure that all activities involved have quantifiable performance measurements based on results.

* Ensure that marketing staff have clear job descriptions with defined areas of interest and responsibilities.

Marketers have an important role in every business, as they have to produce the income on which it will survive and grow. Those with ability will prove their worth in the income they produce and the efficiency with which they do it. Those that “game the system” will ultimately be found out, either by diligent management, or their firm’s bankruptcy resulting from their failure to produce the profitable income necessary for its long term future.

© N.C.Watkis, Contract Marketing Service 26 Nov 10
Contract Marketing Service, (Marketing Performance Consultants)

If you don't do this, you won't succeed

2010-11-04T15:43:00.001Z

If you don’t do this, you won’t succeed

Most marketers would consider their role in a business to be one of creativity, especially regarding advertising, promotion, customer relationship management and networking.
But the marketer with the mandate to get and retain business also has the responsibility for managing resources to achieve the objectives of the corporate plan. Business exists in the dynamic of the market, so a marketer needs to be able to constantly adapt resources and actions to meet changing market conditions.

The marketer tasked with getting and retaining business must be able to show how they are using assets and resources efficiently and effectively to achieve this. Thus the most important activities for the marketer are the establishment of marketing objectives, a plan for their achievement, a budget to support the plan, and the management of assets and resources to achieve the objectives. Why is this? It is because it is in these areas, that many marketers will be assessed and may be found wanting.

Preparing a marketing plan to achieve the marketing objectives is a complex process, and should not be confused with producing a marketing budget. However, it is not unknown for even large companies to confuse the production of a marketing plan with that of producing a budget. There is an erroneous assumption, that a spread sheet of numbers relating to allocated spending on the various activities of the marketing function is sufficient to be called a marketing plan; - it isn’t! Such a spread sheet may illustrate how money is to be spent, but does not include the actions required to produce income. What then should a marketing plan include?

Setting objectives is the first priority, because it defines what is to be achieved to support the requirements of a firm’s corporate plan. Peter Drucker is quoted as saying that “if you can’t measure it you can’t manage it.” So the setting of marketing objectives should be largely quantifiable and thus measureable. Unfortunately, many marketing objectives are subjective statements and therefore not measureable. Alternatively, objectives may be quantifiable, but may not be usefully comparable to other measurements, which may ultimately prove difficult for the marketer, especially when asked to give proof of their contribution to the business.

There are a number of components that are essential for a marketing plan. First the objectives of the marketing plan both financial and marketing must be clearly stated. Financial objectives should state the monetary objectives of the plan in terms of the target revenue, the net profit and the required return on assets. These are all terms that will be understood by both the CEO and the CFO, and are therefore particularly important. Marketing objectives will relate to the “4 Ps” of the marketing mix, namely product, price, promotion and place or market, but should also include quantifiable objectives such as marketing contribution and optimum performance.

Marketing planning should not be done in a vacuum, yet how many plans are written without any description of the market and economic situation in which the plan is supposed to operate? Marketers need to ensure that the assumptions made about the prevailing economic and market environment are clearly stated, and the potential risks highlighted. As both the market and economic situations are dynamic and evolving, so it must be expected that plans, especially those for the longer term will need to be adapted to meet those changes.

Having set out the objectives, the most important part of the planning process is the listing of the actions necessary for their achievement. To be effective, each action needs to have a completion date, together with the identity of those delegated with the responsibility for the action. Setting completion dates for actions helps to concentrate the mind, because their successful competition may have a profound effect on other important actions and the achievement of objectives. For instance, achieving a major contract may be a major part of the revenue objective. Thus knowing when that contract needs to be confirmed is of major significance, especially if things go wrong and the expected income has to be found from elsewhere.

Preparing alternative actions to be used when the unexpected happens or the contracts fail to materialize, is an important planning process that is frequently forgotten. Marketers must be able to change tack or divert resources into other alternative actions, and to do it quickly, if the primary actions fail to produce the results; being able to do this effectively is the art of good planning and successful management.

Finally, to illustrate how assets and investment are to be used to achieve the objectives of the marketing plan, a profit and loss projection is required together with a detailed marketing budget showing the allocation of resources.

Chief marketing officers (CMOs) and marketers will be increasingly be measured by their results, so it is essential that they set quantifiable objectives and detailed plans for their achievement. If marketers don’t do this, they will have failed in their responsibility and they won’t succeed in their task.

© N.C.Watkis, Contract Marketing Service 25 Oct 10

Can you spend nothing on Marketing?

2010-10-04T16:32:00.000+01:00

The leader article in September’s edition of “The Marketer”, titled “Who needs money?” suggested the idea of “marketing “without money. The article cited several companies which claim that they started or continue to have a marketing budget of zero, amongst them being the IT companies Google, Linux and Facebook. It also claimed that it was not only hi-tech businesses that were innovative and successful by doing “marketing” with a zero budget, but that some service companies such as McKinsey did not have a marketing organization, to which could be added Timpson’s, the high street heel bar retailer. But is it really true that successful “marketing” can be done without money? However attractive the idea may be, the idea that “marketing” may be done without a budget does not stand up to simple scrutiny, unless one has little or no real understanding of what is involved in “marketing.”

It is a truism, that you cannot get something for nothing. There is always a cost to someone, somewhere, and so it is with “marketing.” Surprisingly, for the magazine “The Marketer”, it seems that the Chartered Institute of Marketing (CIM)’s definition of marketing has been forgotten or not understood.

“Marketing,” as defined by the CIM, is the management process that anticipates and satisfies customer demand profitably, essentially being a process of managing resources and assets to produce profitable income. Thus the CIM’s definition involves a great deal more than simply promotional activities or even selling. But many people allegedly involved in “marketing” make this confusion. In “marketing” the importance is to anticipate and satisfy customer requirements to produce income, which requires a whole range of specialist disciplines including marketing research, product development, promotional communications, and especially selling.

The article in “The Marketer” suggests it is possible for even large companies to declare that they have zero or very low marketing budgets, but this is not actually the case. The truth is that many companies, perhaps a majority, have little idea what it actually costs them to get and retain business. There are many reasons for this, but a misunderstanding of the nature and purpose of marketing by both marketing staff and senior management is probably a primary cause.

In addition, the traditional departmental organization in companies means that the responsibilities of marketing organization are generally restricted to sales and sales support, rather than to the wider requirements involved with anticipating and satisfying customer demand. Investment in good marketing research is necessary to understand the market trends and anticipate customer demand. Satisfying customer demands includes other areas not thought of as part of the traditional “marketing” area of responsibility, such as product development, (guided by market research), production, and distribution. In addition, the area of credit control can have an important role to play in customer satisfaction. Thus “marketing” budgets are often at best incomplete in their scope, being derived from responsibilities of the marketing organization within the organizational structure, rather than from all those activities collectively involved in satisfying customers to produce income.

The purpose of “marketing” is to get and retain business to produce sustainable profitable income. “Marketing” is not another name for promotion or sales; there are many activities and disciplines involved. It is possible to have a minimal or zero promotional budget, as some successful IT companies do, but it is not possible to have a zero marketing budget if everything is properly accounted for. In its simplest form, the sole trader making his own goods and selling them on a free pitch on a street, may have spent nothing on promoting his business, but if “marketing” is about getting and retaining business, that trader has to make the goods and spend time selling them. He may not consider it, but there is a cost to him in getting and retaining business because of the cost involved in working time whether or not it is paid for.

Perhaps the reason for thinking that it is possible to have a zero promotional budget stems from the desire, from some marketers, to avoid having to measure the return on their investments, so there is an attraction in the idea of a zero investment. But the purpose of marketing is to generate money. Marketers will be measured on how much income they generate and how much it cost to produce it. Marketers must therefore be fully aware of what is involved in all the activities required to anticipate and satisfy customer demand profitably, and not delude themselves into thinking that they can get and retain business without cost.

© N.C.Watkis, Contract Marketing Service 27 Sep 10
Contract Marketing Service, (Marketing Performance Consultants)

Marketing – making it happen

2010-09-07T15:06:00.000+01:00

The fundamental requirement for a successful business is to understand the potential customer’s problem. Customer’s have problems which they seek to resolve to make their lives easier. The job of the marketer is to identify existing and possible problems of potential customers, anticipate the resolutions that potential customers seek and by providing product and services which resolve their problems and fulfils their needs, produce income.

In theory, if the potential customer has been identified and their problems fully understood, a product or service that resolves their problem or satisfies their need should result in an automatic sale. But things are never that simple. Unless a product or service is made specifically to each individual customer’s requirement, a mass produced product or service is going to require some compromise on behalf of either the customer or the producer.
Convincing a customer to accept some compromise and to commit themselves to purchase is the process of “Selling.”

Having a marketing strategy, a plan and a target for sales and income are all important but they are not enough to ensure that a business is successful. Ultimately the only way that a strategy is followed, a marketing plan adhered to and sales and income targets achieved is by “Making it happen.” Putting it simply, the ability of a manager to “make it happen”, is the deciding factor that divides successful from unsuccessful businesses. But what does “Making it happen”, in terms of producing income, actually require? The answer in part depends on the size of the business and its resources.

A lot of books and theory regarding marketing (that is, about producing profitable income by anticipating and satisfying customer demand) consider the large company model, where the organizational size allows for specialist departments such as sales, purchasing, finance, and manufacture. The family tree structure of separate departments helps explain how different business disciplines can be organized to work together. But whereas in large businesses, each department on the family tree may be manned by a large number of people, in small companies, those departments may be managed by less than a handful of people, and possibly by only one.

In the larger company, the executive responsible for getting and retaining business, who may be the chief marketing officer (CMO), will have overall responsibility for a sales organization. Selling organizations may consist of direct selling through a sales team as well as non personal selling through the internet, direct mail, and direct sale advertising, all of which require specialist management to be successful. In larger organizations, the CMO may therefore manage a team of sub-mangers responsible for different areas of the sales organization.

The effective management of a sales organization in larger companies, requires the CMO to be competent in the selection and training of salespeople, planning, direction and targeting, performance measurement, to have the ability to motivate personnel and be able to demonstrate effective leadership. The abilities of the sales organization are fundamental to business success, thus its effective management is of major importance. CMOs will be judged on their ability to produce the required level sales income, thus their management skills and leadership attributes will be fundamental to the success or failure to “Make it happen.”

In small and very small companies, the chief executive (CEO) may have to do much of the work themselves, having very few specialists to whom they may delegate responsibility. The person responsible for producing the income may be the senior salesman, or even the CEO themselves. To produce the necessary income in a small business requires the same skills as in the larger business, but on a different scale. In many ways the executive of a small business has to have more skills than their approximate counterpart in the large company, because to be successful, not only do they have to be jack of all trades, they also have to be competent at them, if not actually masters.

For the small business, selling is probably the most important activity, because it produces the necessary cash-flow, for the day to day running of a business which will not have the financial resources of its larger counterparts. It follows that if they want to be successful in producing income, those executives responsible for its production need to be competent in their selling ability. Small businesses have not got the time and resources to rely on trial and error to produce sales revenue. Therefore if those responsible for producing sales income in small businesses don’t have formal sales training, but are themselves directly involved in selling to customers, they should undertake formal training in selling as soon as possible. In small businesses, “Making it happen” will depend on the individual abilities of perhaps a very small number of people actively involved in selling.

While “Making it happen”, in large companies relies on the CMO’s management skills and leadership attributes to produce results, in small companies, “making it happen” often relies on perhaps one individual’s necessary motivation, self confidence, self reliance and above all, their selling ability to produce the necessary income.

© N.C.Watkis, Contract Marketing Service 01 Sep 10
Contract Marketing Service, (Marketing Performance Consultants)

If you want to be heard, speak the language

2010-08-06T11:43:00.000+01:00

In the present trading climate, getting and retaining business will continue to be difficult for the foreseeable future. Companies expect that sales income will probably be less than previous years, and that they will have to work harder to maximize their potential income. Demonstrating efficiency and effectiveness in obtaining that income will have increasing importance.

It has been said, that everyone in a business is involved in “marketing.” But if “marketing” is the process of producing profitable income by anticipating and satisfying customer demand, then clearly, not everyone in a business is directly involved in the process. Businesses exist to make money, but not all employees are directly responsible for producing income. People involved in finance, personnel and purchasing, provide the necessary resources for a business to operate, by providing money, people, and supplies. Business employees involved in development, production, sales and sales support, are directly involved in activities which “anticipate and satisfy customer demand profitably”, and are therefore involved in “marketing.” Where does this leave the professional marketer? Are professional marketers needed?

If “marketing” is as undervalued as marketers often claim, what should they do about it? The world does not owe marketers a living. Marketers must prove themselves and demonstrate how their profession is not only relevant to a business, but is an essential function for its development. Marketers often consider themselves experts at marketing communications, yet if they are so good at communications, why are they apparently misunderstood and “marketing” undervalued?

Marketers have to be clear about what they do and to quantify what they contribute to a business. It was said of the late Lord Weinstock, when he was chairman of GEC that he would telephone his senior managers daily to ask how much money they had made. The story may be apocryphal, but the principle is a good one for marketers, in that they should be able to demonstrate and quantify, their contribution to the production of profitable income.

The task of the chief marketing officer (CMO) is to produce and maximize sustainable profitable income, while minimizing the use of assets and investment. In reality, many marketers do not have overall responsibility for producing sustainable income, but are involved in what might collectively be called sales support or the specialist areas of E-marketing and internet selling. For marketers whose jobs do not have an easily quantified outcome, justifying and demonstrating their contribution is more problematic.

The only thing that the Chief Executive Officer (CEO) really wants to know is, how much profitable revenue has been produced and how much it cost to produce it?
Business reports and other communications must clearly show what marketers are contributing and how these actions directly or indirectly assist in the production of profitable income. For many marketers, communication actually is the problem. Examination of many marketing reports and articles leaves the impression that they are written by marketers for marketers, rather than for non marketers who need to read them in order to make informed management decisions. Marketing jargon and “Corporatese” which fill such articles and reports with fashionable words and meaningless phrases such as, “blue sky thinking”, “leveraging”, “alignments” and “stakeholders”, to name but a few, confuse and bore the reader. Thus potentially important documents are easily dismissed by readers as “so much irrelevant waffle”. This poor communication, devalues the contribution of the process of marketing and the work of professional marketers. What can marketers do about this?

Marketers have to be clear about what they do and contribute to the business. For that, they need to have clear job descriptions that define their responsibilities and provide for quantified outcomes. It should be remembered that “marketing” is not confined to advertising, promotions or public relations, but is a function of management to control assets and investments to produce profitable revenue, by anticipating and satisfying customer demand. As such, the value of “marketing” and the contribution of marketers must be measured by results.

The purpose of communication is to impart knowledge and understanding to its recipient. Marketers must communicate what they do, how they do it and with what results. To convey this, marketers need to present their results, in the language of finance for the benefit of the CEO, showing how much income was made and how much it cost to produce it. But every other form of communication needs to be given in plain English devoid of “corporatese,” “marketing speak,” and fashionable jargon, so that anyone is able to read or hear with complete understanding. By communicating in plain, intelligible English, marketers will gain credibility from their audience and be valued for their contribution and professionalism by their employers.

© N.C.Watkis, Contract Marketing Service 28 Jul 10
Contract Marketing Service, (Marketing Performance Consultants)

Is Marketing Dead?

2010-07-12T16:18:00.002+01:00

Is marketing dead? Judging by a number of recent articles, especially in the American business press, some people would seem to think that it is. Perhaps American marketing is dead. But what are these articles actually talking about? Is that, which some people call “marketing” something specific, or is it just another business process?

One has to accept that despite there being some very good “official” definitions of the term, most people have their own ideas of what they think the word “marketing” means, and these vary considerably. Why is this? It seems that it is largely the fault of marketers, who rather than promote an agreed definition, would rather use the word “marketing” as it suits them in a casual way. Marketing thus becomes an increasingly vague and devalued word, open to many differing interpretations and frequent misunderstanding.

The purpose of any business is to produce money in the form of profit, by performing a service or producing a product which customers want to buy. To enable a business to start requires money, provided by investors and a workforce who undertake the necessary work. Income produced by selling the goods or service provides payment for the workforce and a dividend for the investors. However, if the business is to continue for the long-term benefit of the workforce, investors and customers, it must ensure that its income is sustainable and continuing into the future.

Businesses can be divided into two distinct areas; business operations and business support.
Business operations involve getting and retaining business to produce profitable income, by the anticipation and satisfaction of customer demand. Thus business operations involve market research, product development, manufacture, customer identification, advertising, promotion, public relations, sales, delivery, after sales service and credit control. By contrast, the business support function provides the necessary resources to enable the function of business operations to actively produce income, including finance, personnel, and purchasing.

In order to maintain the flow of necessary profitable revenue requires the constant getting and retaining of business, which requires the combined activities of the Business operations area. Getting and retaining business is therefore the most important activity in any commercial organization, without which it would have a very limited future.

The Chartered Institute of Marketing defines “marketing” as “the management process that anticipates and satisfies customer demand profitably”. In other words, marketing is about producing profitable revenue by getting and retaining business. “Marketing” is therefore at the centre of business operations. In fact, considering all the various activities which are involved in anticipating and especially satisfying customer demand, which must include production and product development, “marketing”, might be better described as “the function of business operations.”

Unfortunately, from the business press, it would seem that marketers always to want to become more specialists in narrower skills, such as E marketing, customer relationship management, advertising, promotion and PR. Few marketers either appear to have, or want to have experience of sales and selling, yet sales and selling are the ultimate test of every business as these are the actions that finally produce the income. But if marketers see themselves as a separate business area to those involved in sales, who then who takes overall responsibility for producing the necessary sustainable profitable income on which the future of every business relies?

The word “marketing” is becoming devalued, being mistrusted by the public and by business in general, largely because marketers continue to use the word casually. Many people claim that they are involved in marketing, and so they are, but on closer inspection, unless they are involved in producing profitable revenue, they are only involved in “marketing” based disciplines, with the danger that they become more remote from the income producing process.

No matter what you call it, the business process of “producing sustainable profitable revenue by anticipating and satisfying customer demand”, is fundamental to the success of any and every commercial operation. The term “marketing” may be dead in some people’s opinion, but the business and management processes necessary to produce sustainable profitable income for the long term, remain the same, regardless of whatever fashionable term is given to them.

Next year, the Chartered Institute of Marketing (CIM) celebrates its centenary. Some have suggested that the centenary year would be a good time to revise the CIM’s definition of marketing, but this is not necessary. Marketing definitely is not dead, because the process is fundamental to every business. However, the word marketing may be redundant as a meaningful term which may be clearly understood without equivocation, unless professional marketers on both sides of the Atlantic learn self discipline in their use of the term and vigorously defend its confinement to a sound definition.

Perhaps, rather than continuing futile attempts to redefine the term “marketing”, it is time to seek a new word or term that embraces “the business process of producing sustainable profitable income, by anticipating and satisfying customer demand,” and one on which we can all agree.

© N.C.Watkis, Contract Marketing Service 28 Jun 2010
Contract Marketing Service, (Specialists in Measuring Marketing Performance)

The most important marketing lessons ever forgotten

2010-06-08T10:51:00.001+01:00

Probably one of the most tired but frequently used expressions in business and government is “lessons will be learned”. However, only individuals can learn lessons, and when those individuals move from the organization, so the corporate lessons and memory move with them, so that lessons have to be re learnt, and frequently the “wheel re-invented.

In the commercial world, those activities involved in producing income by getting and retaining business, otherwise known as marketing, often involve staff whose tenure in post is measured in months rather than years. Surveys by the CMO Council and the Chartered Institute of Marketing suggest that on average, marketing staff stay only 18 to 24 months in post or less. In such circumstances, how can long term objectives be achieved? When events occur or there are changes in market conditions which cause lessons to be learnt, how can those lessons be implemented if the personnel who supposedly learnt them are no longer there? Institutions and companies are made up of people, so that such corporate memory as there is, only exists in people that work there. Where there is a frequent turnover of staff, there is little scope for corporate memory, so that the personnel frequently waste time and resources reinventing the wheel. This is particularly apparent in marketing organizations, where the short term nature of staff manifests itself in a culture of constant change. There is nothing wrong with change, but the nature of change and its frequency can and does cause problems, especially when they are not fully implemented before being changed again. With frequent changes of marketing staff there is a cost to the business in loss of knowledge and experience, plus the financial cost of recruiting, and training.

Managers of marketing are responsible for producing sustainable profitable income for the long term. To do this effectively, requires both new ideas, experience of the market and an understanding of the business’s previous business getting and retaining activities. The problem for managers of marketing, is that survey evidence tends to show that a majority of marketing practitioners see frequent job change as a way of career development towards a high paying placement. This is may be good for the individual, but it is not good for a business, as such people generally do not think and act for the long term benefit of the organization,

The late Robert Townshend, former chairman of Avis and author of the internationally acclaimed best seller, “Up the Organization,” understood that for any business, “Marketing was the name of the game”. By this, he meant that marketing was fundamental to the business as the management of all those activities involved in producing sustainable profitable income for the long term future of the business. However, while agreeing the fundamental importance of marketing, Townshend was not a believer in marketing departments.
He took the view that marketing strategy should be decided by the chief executive officer (CEO) who should be responsible for making overall profits, and another senior executive who would be responsible for producing the necessary sustainable profitable income. That person might be given a variety of convenient titles, from director of business operations, to director of marketing or sales and marketing, but their job would be to maximize sustainable profitable income, while minimizing the use of marketing investment and resources.

Townshend advocated using outside full service marketing agencies, as a cost effective alternative to employing ,internal marketing specialists, as it reduced the marketing overhead, and gave greater flexibility to use resources as necessary. These marketing agencies would provide specialist support as and when required, for marketing communications, market research, customer relationship management, and any other specialist services required which could also include the contracting out of selling operations.

The advantage of using outside specialist agencies and contractors, rather than employing internal specialist staff is that their collective experience is usually greater than would be expected from an individual company employee. Agencies and contractors provide services only as and when needed, providing increased flexibility for the client company in their use of assets and investment. At the same time, specialist contractors and agencies usually look for long term associations, providing a stability which may not be apparent with marketing employee who may be guided by short term personal interests. While Townshend’s approach may not appeal to all, it does have some significant advantages, especially for those small and growing businesses with more limited resources requiring greater flexibility in their use.

For companies large and small, there is a long term marketing advantage in retaining strategic policies and decisions with senior managers, while sub-contacting all specialist activities elsewhere. By the flexible use of out sourced specialist marketing contractors, managers of marketing may minimize the use of assets and resources and limit the risks of their marketing investment, while retaining control of corporate memory, objectives and policies for the long term benefit of the business.

© N.C.Watkis, Contract Marketing Service 02 Jun 2010

Think the unthinkable?

2010-05-20T16:14:00.000+01:00

Managers of marketing, who are charged with the responsibility of getting and retaining business to produce profitable income for their employers, need to consider both the long and short term requirements of their employers business. Decisions that have short term positive results may have long term negative consequences, and visa versa.

As markets and businesses develop, so also do attitudes, legislation, and technology change, as well as other factors, which may profoundly alter the marketing environment in which a business operates. Such changes can and should bring about a full re-assessment of the business and its future, which may produce some radical views and ideas for consideration.

During the 1990s the Government of the day introduced legislation generally known as the Beer orders, to attempt to break up the control that the large brewing companies had over the pub trade through their tied public houses. This legislation severely limited the number of tied outlets that could be owned by a brewing company, and also required the remaining tied outlets to supply at least one beer from a different company, in order to improve customer choice and competition.

This change in the law was probably fundamental in a major reappraisal by Whitbread Group Plc, of its business and long-term future. Founded in 1742, Whitbread Group Plc was one of the largest brewing companies in Britain, with extensive interests in pubs, restaurants, hotels and leisure clubs. After careful re assessment of its business and future, and despite its origin and a long history of brewing, the company decided in 2001, to sell all its breweries and brewing interests to Interbrew, and the following year sold its pub estate, to Enterprise Inns.
The company is now firmly established in the hotel and restaurant market, and is totally divorced from its original business of brewing and pubs. Whitbreads radical departure from its original business is a good example of a business assessing it along term future, and radically altering where it would invest its assets and resources for the best sustainable return.

Marketers and managers in charge of getting and retaining business should, from time to time, be prepared to think the unthinkable. As businesses and markets develop and evolve, so the situation can arise where the founding work of the business may only provide short-term gains, but may no longer provide for a sustainable profitable long term future.

Marketers should not be deflected by vision statements, from their prime objective of producing income for the business. Vision statements are generally inspirational, but lacking in objectives, have little relevance to the day to day delivery of the business.

It is also possible that vision and mission statements may get in the way of clear thinking, obscuring rational and perhaps radical thought and creative solutions to changing markets and trading environments. Regardless of what vision and mission statements may say, the only purpose of any business is to make money for the benefit of both the shareholders and the workforce. As businesses develop and diversify into areas away from their original roots, marketers must be fully understand from where their profitable income is derived, where costs are incurred and where investment is needed for both short term requirements and the long term future.

While it was still heavily engaged in brewing and the pub trade, Whitbread had already expanded and diversified into the hotel and leisure industries, which had great scope for long term growth. By contrast, Whitbread considered that the opportunities in volume brewing were in decline, and therefore the requirement by legislation to sell the majority of their tied public house estate , was a singular opportunity to reassess the companys future both long and short term.

The principle lesson for marketers is that their prime responsibility is to produce and maximize sustainable profitable income of the business while minimizing costs, assets and investment, in order to develop and maintain the long term future of the business. The key question that has to be asked is, Are we in business to make a product or to make profitable income for the benefit of the shareholders and the livelihood of the workforce? Continuous analysis of the market environment and especially detailed analysis of the business's performance within it, may frequently produce a requirement for cross road decisions, where there may be a choice between a short term gain with limited future, or a long term benefit for a sustainable future. Such decisions may be radical with serious repercussions. But sometimes thinking the unthinkable may, as with the example of Whitbread, be a road to a sustainable profitable long term future which is, after all, the purpose of business and marketing.

©N.C.Watkis, Contract Marketing Service 11 May 10
Contract Marketing Service, (Marketing Performance Consultants)

Marketing - You can’t measure what you don’t define.

2010-04-19T15:46:00.001+01:00

The recent survey, “Marketing Measurement and Accountability”, by Deloitte and the Chartered Institute of Marketing (CIM), makes for interesting reading. The initial results from this survey reveal that 56 per cent of the companies surveyed do not feel that they have more than a basic capability for measuring “marketing” effectiveness. Although the survey is still continuing, apparently less than 10 percent of organizations have set clear performance indicators, and 19 per cent of those companies surveyed stated that they never establish clear accountability for strategic “marketing” initiatives.

Should one be surprised at these results? Not really, because despite all that is talked about “marketing”, the results are remarkably similar to other surveys done in recent years. The CMO Council in America conducted a survey in the spring of 2004 of over 320 of America’s leading technology chief “marketing” officers, which revealed that less than 20% of the companies surveyed had developed meaningful measures for their “marketing” organizations. The survey showed that over 80% of the companies surveyed, expressed dissatisfaction with their ability to benchmark their “marketing” programs’ business impact and value. Yet those companies which had established a formal comprehensive measurement system achieved superior financial returns and had higher CEO confidence in their “marketing” function. In 2006 the CMO Council conducted a similar survey in Europe with similar results.

The Deloitte survey was based on about 40 questions, yet it seemed to have made one assumption that the term “marketing” was equally understood by both the finance and “marketing” leaders of the companies surveyed. Nowhere in the survey was a definition of “marketing” used to verify this assumption.

In 1976, the Chartered Institute of Marketing (CIM) defined “marketing” as “the management function of all those activities which anticipate and satisfy customer demand profitably.” However, since that time, understanding of the term “marketing” has become increasingly confused. Even the CIM frequently uses the term “marketing” in a casual way that undermines their own definition. It is therefore open to question, what the financial and “marketing” officers of those organizations which participated in the Deloitte survey, understood by the term “marketing”, and therefore how the answers and the survey should be interpreted. The questions in the survey are all very interesting but are they relevant? Do they apply to all businesses or only to large companies?

The purpose of every business is to make money. The purpose of a “marketing” organization is to produce profitable revenue by anticipating and satisfying customer demand. The objective of every manager of a “marketing” organization is to maximize sustainable profitable revenue while minimizing the use of “marketing” assets and resources. These are the principles on which “marketing”, as defined by the CIM, can and should be measured because they produce tangible and measurable outcomes.

In every business, whether or not they are called “marketing” managers, sales and “marketing” managers, commercial managers or sales managers, someone will be responsible for getting and retaining business to produce the necessary income for the organisation. For many the term “marketing” has become debased and meaningless, yet whatever it is called, the management of all those activities required to anticipate and satisfy customer demand profitably, is still fundamental to the long term future of every business large or small.

The understanding and profitable satisfaction of customer problems and requirements, both present and future, is fundamental to establishing a successful business. But contrary to what some may believe, customer satisfaction is not the objective of “marketing”. Customer satisfaction is important, but customers can be satisfied by the provision of free goods and services. However, unless effective management can ensure that customers can be satisfied profitably the business will ultimately fail.

Understanding the role and contribution of “marketing” for any commercial organisation, involves measuring how much profitable income is produced and how much it costs to get and retain business. There are no magic formulas in business or “marketing”, which if applied will guarantee required results. Every “marketing” action should be questioned on how it will help to produce income and how much it costs.

The Deloitte CIM survey illustrates the desire of companies to understand and quantify the contribution of “marketing” to the business, in order to justify their financial investment
However, without an agreed understanding of the definition of “marketing” as the CIM defined it, it is difficult to decide what “marketing” actions could and should be measured and to what effect. By not initially defining the term “marketing”, the survey leaves it to individual interpretation, making it difficult to draw any coherent conclusions from the answers given.

The definition of “marketing” produced by the CIM may be over 30 years old but it is not out of date, as it encompasses all the elements essential for a self supporting sustainable business, which is to make profitable revenue by anticipating and satisfying customer demand. What may be out of date is the term “marketing” itself. Perhaps trying to find a new definition of “marketing” on which all might agree is looking at the problem the wrong way round. Perhaps the real requirement is to find a new word or phrase for “the collective management of all those processes involved in producing sustainable profitable revenue by anticipating and satisfying customer demand,” then we can measure what we have defined.

© N.C.Watkis, Contract “marketing” Service 12 Apr 10
Contract “marketing” Service, (“marketing” Performance Consultants)

This blog has moved

2010-04-14T12:07:00.001+01:00

This blog is now located at http://marketingmngmnt.blogspot.com/.
You will be automatically redirected in 30 seconds or you may click here.

For feed subscribers, please update your feed subscriptions to
http://marketingmngmnt.blogspot.com/feeds/posts/default.

Necessity is the mother of invention

2010-03-15T12:28:00.001Z

There is nothing like necessity to concentrate the mind. Whether or not the economy is still technically in recession is irrelevant to most businessmen and marketers in particular.

Regardless of what either government or economist may say about the state of the economy, the chief marketing officer (CMO) is still responsible for producing the financial income on which the business depends and is faced with the realities of the market in the level of demand, the volume of orders, number of customer creditors, and the rate of cash flow.

Experience shows that the effects of recession are manifested in a slowdown of orders as customers defer their decision-making and an increase in payment times. Fewer orders and slower payments can seriously reduce the level of cash flow, and panic a business into a hasty and ill thought out round of cost cutting. Advertising and promotion costs are easy to cut , but research has shown that companies that continue to advertise during a recession do better than those that don’t. Reducing corporate advertising may have little direct effect on sales, but a reduction in product advertising may be counter productive.

It is a general observation that in a recession, work gets harder and results take longer to achieve. In this situation, what can and should the marketing manager do? Cutting budgets is a crude but effective way of making savings, but it does not increase revenue or cash flow. Alternatively, improved efficiency may produce cost savings, which may in turn improve the return on investment and the overall level of profitable revenue.

If key orders have not arrived as scheduled, the initial action of the CMO should be to refer to the marketing plan and consider the contingency actions that should already have been prepared for just such an event. In the absence of a working contingency marketing plan that would take immediate effect, the CMO will have to prepare a reappraisal of the marketing situation, and a new plan of action, which will take time.

The CMO should first consider at all the elements that form the marketing budget. In many businesses, what is described as the marketing budget in fact only relates to a part of all those elements involved in anticipating and satisfying customer demand. In such circumstances, the CMO may not have complete authority over all those budgetary elements that relate to marketing, but it should not preclude a necessary interest in those budgetary elements outside the CMO’s immediate responsibilities. Each area of the budget needs to be assessed to ascertain where the money goes, to what purpose, and to what result. In every case, CMOs should be asking:

* Are we doing this right?
* Could we do this better?
* If so, - how?
* Has anything changed?
* What has changed?
* How has it changed?

It may be the case that there is little that can be done to hasten customer decision making in the short term. Special offers and credit options may be helpful in converting slow customers, but they should generally be avoided if the results do not contribute to overall profitable income. If the current customers are not producing enough income, then ways to increase the potential customer base may need to be considered, including diversifying into other markets, products and services. Before embarking on new sales activities, it is important to get the opinions of those directly in contact with the customers, in order to understand their problems, and to encourage their ideas to save money, cut waste and increase productivity. Some ideas may be radical, and some may require investment, but if valid ideas and suggestions which emanate from the sales team are implemented, they are more likely to be successful than those imposed by management who are not directly acquainted with the problems.

The operating costs of running a sales force can be some of the most expensive in the marketing budget; therefore efficiency and effectiveness are all important. Sales managers who must organize and motivate their sales teams to maximize sales, while minimizing the costs involved. CMOs should be prepared to reappraise the role and activities of a sales force and should:

* Know which areas produce the most income, and which are the most costly to service.
* Consider whether some of the customer base can be served by other means.
* Look for alternative ways for increasing the number of enquires including seeking new markets.
* Consider whether current methods of selling are still suitable for the current market conditions or could others be considered as an addition or alternative?

Necessity is the mother of invention. A slowdown in demand can bring new opportunities by enforced radical thinking. Being responsible for producing the profitable revenue for the business, CMOs should not be afraid to question what they do and how they do it and look for new ways to improve efficiency in producing their financial contribution.

What does PR do for marketing?

2010-02-12T15:27:00.003Z

Advertising and public relations are major elements of their marketing mix for many businesses, Provided that advertising agents are properly briefed, it is possible to have advertising plans which are in part at least, measurable in their results. But what about Public Relations? How does Public Relations (PR) fit into the marketing mix? What does PR contribute to the overall output from marketing?

Public Relations is an expensive business and by its nature is not fully controllable. With advertising, money buys media space and broadcast airtime, but with PR, the investment is not so certain in its outcome. Time and money may be spent in producing press releases, but with no guarantee that any of them will find their way onto the printed page, television, radio or any other form of mass media. However, the right story can incite interest and be reported worldwide, but whether it is the right story is decided upon by editors of the media, not by the marketing manager from the originating business. The story that results may be of interest to the media, but may be to the detriment of the business. While perhaps it may be said in celebrity circles that all publicity is good publicity that is certainly not the case in the world of business, where bad publicity can have a seriously damaging effect sales and income.

PR for businesses works on two levels. On one level, the ultimate purpose of PR is to keep the company and the product in the public eye in order to aid sales. PR is used to develop a positive attitude to the product and the company by informing potential and existing customers. On a second level, PR helps to provide a supportive attitude within the local and national community, which may help in the recruiting and retaining of staff and develop a general accord with the company’s objectives.

Publicising support the local football team, may be good in developing a positive attitude amongst the local community towards that company, but is very unlikely to directly influence sales, or open doors for the sales force. Similarly, press releases about new products and services my help to open doors to the sales force, by informing new and potential customers, but may have little or no impact with the attitudes of the local community towards the business. When considering PR opportunities, the marketing manager needs to consider how it will contribute to the overall marketing output. If PR expenditure is to support corporate objectives as opposed to sales support, then it should probably not be part of the marketing budget.

In his world number one bestseller book, “Up the organization” the late Robert Townsend, chairman of Avis Corporation, recommended the sacking of PR departments and outside agencies, and appointing a number of internal executives as official spokesmen for particular aspects of a company’s business. Townsend’s approach to PR is imaginative and cost effective, provided that it is the media that seek information about a company. However, should a company seek to be pro active in issuing information to the media, then using PR professionals may have an advantage.

How should the marketing manager evaluate the contribution of PR to the overall marketing activity? Although the contribution of PR may be subjective rather than quantitative, it has an important role in projecting the image of the business, its products and services,

When considering the potential use of Public Relations it should be remembered that:

* All publicity is not necessarily useful publicity.
* Marketing managers have a responsibility for public relations and its contribution to the marketing function.
* Public relations activities that directly support the maintenance of the sales effort are of value to the marketing function.
* Public Relations activities which do not clearly support the sales effort and the production of income are unlikely to be of value to marketing function. That is not to say that such public relations articles and activities have no value to the business as a whole, but its value might only be regarded as corporate support, and thus not a marketing asset or responsibility.

Marketing managers must therefore ask:

* How PR might contribute to the marketing plan, as a stand-alone activity or in conjunction with supporting Adverting and promotion?
* What aspect of the business will it help – e.g. sales support or corporate image?
* When should PR methods be used – is it timely?
* Where should PR stories and activities be place for best effect?

Using public relations wisely, can do a lot to influence public attitudes towards both products and businesses. For the marketing manager, PR that supports the selling activity is all important in maintaining the customer’s confidence in the product and the business’s ability to satisfy their requirements. To what extent the public image of a business actually effects the sales of products is debateable and may depend on the image and quality of the product and the size of the business. In the end, the value that PR makes, especially in supporting the sales effort, is a judgement that marketing managers must make and justify.

Forget Crystal balls, senario planning is what you need.

2010-01-11T15:38:00.000Z

The prospect of the end of the year always brings out the crystal ball for New Year predictions. For all people in business and especially for those in marketing, crystal ball gazing may be fun and an interesting diversion, but it more often seems to relate to wishful thinking rather than be grounded in reality.

Much of what is predicted in January fails to materialize and can often be simply wrong. Changes in market conditions and trends do no suddenly start on the 1st of January. So is there any value in making New Year predictions? The answer is yes, but it depends on what is being predicted, how the prediction was made, what information was used and what assumptions were made.

Most of the market trends that started in 2009 are likely to continue into the New Year. However there are some events which will make a difference to the economy and therefore to market conditions, such as the level of demand, which may affect the lifeblood of business.

While it is expected that the British economy should be out of recession, hopefully in the first quarter of the year, there is no guarantee that it will be. Short of a miracle, it is unlikely that there will be any appreciable increase in demand in the first half of the year in most market sectors. Consumer confidence will take many months to restore to a level where demand can be seen to be growing to any appreciable extent. The coming General Election, which has to be held by the end of May, will help economic confidence by providing a degree of certainty for at least the next few years, in which both business and consumers can operate. However the extent to which the General Election affects the level of confidence and demand, will depend on the political outcome.

What is certain, is that there is little that can be done to affect the level of demand. In a recession, demand does not go away, it is only deferred until the consumer is confident enough to buy, or is forced by necessity to purchase. In the meantime, the marketer must use resources wisely to maintain a level of income, and conserve the marketing assets as far as possible. What should the marketer do in such circumstances? There are a number of things that should be done or actively considered:

* Maintain close links with existing customers, monitoring their needs and changing requirements.
* Use the knowledge of the changing needs of existing customers to target new potential customers.
* Consider the problems and fears of customers and potential customer and adapt the product or service to meet their changing needs.
* Continue advertising and promotion, even on a reduced budget, because the market needs to know that your product and service is available rather than that of the competition.

Probably the most useful action of a marketer during difficult trading times is that of Scenario Planning. Few businesses do scenario planning well, but while it takes time, it can be a very useful insurance policy against the unexpected situation. Not long before the 1974 oil crisis, the Royal Dutch Shell Group had worked through such a process, to identify every situation that they could think of, that the company might encounter as an oil producer. Having identified every possible situation that might occur, Shell then produced action plans to be implemented should any of the identified scenarios actually occur. When the Arab oil embargo took effect after the 1973 Arab Israeli war, most of the world’s oil companies were totally unprepared, except for Shell. Shell had considered such a possibility, (which was considered remote at the time) and had prepared plans accordingly. While other oil companies were struggling to find a way to respond to the embargo, Shell simply applied their pre-prepared plan. As a result, Shell had moved in a short time from a position of 10th largest, to 4th largest oil producing company in the world, a growth largely attributed to the company being fully prepared for any conceivable political or trading situation.

Possible scenarios that the marketer should consider in difficult economic times;

* Prime contracts fail to materialize, or are reduced.
* Key customers seek to price reduction or longer credit.
* Increase in payment defaults.
* Increase in aggressive activity from competitors.
* Forced reduction in the marketing budget and resources.
* Adverse Government legislation.
* Difficulties in maintaining necessary supplies.

While some of these possible scenarios may seem unlikely, in difficult economic times, none are impossible. It is the task of the CMO to produce and maximize the profitable income on which the future of the business depends. Therefore when considering what lies ahead in 2010, marketers should consider scenario planning as an important management tool.

In short, the wise marketer needs to consider all possibilities in 2010, planning for the worst, while still hoping for best.

value

2009-12-16T12:49:00.002Z

While chief executives and accountants debate the return on company investment and productivity, the activities which generate business rarely appear to come under such scrutiny. Marketing, which generates profit by anticipating and satisfying customer demand, requires considerable investment in money and resources, and is at the heart of every business.

If all marketing is investment, why would companies not want to assess the returns on their money? Increasingly Chief Executives and Financial Officers are looking to ensure that measurements of the return on investment are used across the whole business area, including marketing.

Cut or not to cut? That is the question.

2009-12-15T15:36:00.000Z

Many businesses are seeing their income fall during the current recession. Demand is still there, but buying decisions are being deferred so that sales income is currently reduced. At the same time, costs remain and may even go up. The result is that profits are squeezed, and can even turn to loss.

The responsibility of getting and retaining business, to produce the necessary profitable revenue, lies with the chief marketing officer (CMO). Getting and retaining business costs money, but when profits are squeezed, there is always a pressure to cut costs, and the marketing budget is often one of the earliest targets. This is because chief executive officers (CEOs) and chief financial officers (CFOs) often do not have a full understanding of what is involved in marketing and unfortunately, too many marketers still do not provide quantifiable evidence that defines their contribution to revenue generation, so the marketing budget becomes an easy target.

If reduced income is causing cash flow problems, then cutting expenditure in the short term may be necessary if the business is to survive. However, if reducing expenditure is considered necessary, then being selective about what to cut and by how much will be essential for the long term future of the business. If the CMO cannot demonstrably justify the level of expenditure in the marketing budget, then cuts in expenditure may have to be made.

Before making any cuts, the CMO needs to know how much it actually costs to get and retain business. This question is fundamental to understanding the true scale of the marketing budget, and how the various investments and costs contribute to the production of profitable revenue. No business can succeed simply by cutting expenditure. Businesses have to produce income in order to survive, but producing income cannot be done for nothing. At the same time, businesses cannot survive indefinitely if costs continue to exceed income. So if cuts are essential for short-term expediency and business survival, what should be done?

* First, the objectives for making budgetary cuts must be defined in order to achieve the target reductions in marketing costs.

* Secondly, there needs to be a cost/benefit analysis of all the options available for reducing costs, especially regarding potential unforeseen consequences.

* Thirdly, decisions must be made on those actions that will least damage the business’s ability to compete successfully in both the short and long term.

It is important not to cut everything proportionately across the marketing budget, as this tends to magnify hidden weaknesses while diminishing strengths.

If the business is to survive over the long term, then it is important to evaluate the expected return on each area of investment and continue to invest in those offering the most attractive returns, while cutting the rest. Consideration must be given to the relative importance of particular customer segments, product groups, and geographic areas, in producing income. Similarly, not all customers, products or areas are of equal value in their production of income. Each should be evaluated and ranked from highest to lowest, according to their expected return on investment, making cuts in the lowest performing ranks. The principle should be to starve weak projects and to feed strong ones.

The impact of cost reduction decisions depends in part on the actions of competitors. Even if competitors cut their expenditures, it may still be possible to achieve as much as previously, but on a lower budget. But supposing the competition cut less, or actually increases spending? Exploring such possibilities, with analysis of the possible cause and effect will help illuminate the level of competitive risk involved in making cuts to the marketing budget.

At the same time as considering where it may be possible to make cuts in marketing expenditure, it is worth considering where it might be advantageous to actually increase spending, in order to compete more effectively. Investing more in customer relations may be necessary to maintain customer retention. More investment may be needed in marketing research in order to fully understand the change requirements of customers who are also affected by the recession. Is the customer being given a relevant message via a media suitable for the recipient? If not, additional investment may be necessary.

In a recession, the first expenditure cuts usually come from the advertising budget. While this may be relatively easy and helpful in the short term if there are problems with the cash flow, it may easily be a false economy, especially when considering the long-term future of the business. Research conducted by McGraw-Hill into the recessions in the U.S. from 1980-1985, showed that out of the 600 business-to-business companies analyzed, the ones who continued to advertise during the 1981-1982 recession hit a 256-percent growth by 1985 over their competitors that eliminated or decreased spending.

Cutting the marketing budget, without a full understanding of the implications is dangerous.
Reducing the financial costs in the immediate short-term, without carefully considering the implications, may dangerously compromise the ability to produce the necessary income for the long-term future of the business.

Marketing the Roman way.

2009-10-19T15:34:00.000+01:00

For over seven hundred years the Roman army, both Republican and Imperial was very successful in the majority of its campaigns. That success was despite the fact that for much of the time the Roman army did not have superiority in numbers or in weapon technology to its adversaries. The great strength of the Roman Army lay in its superior organization, command structure, logistics, training and leadership. It was said of the Roman army that its “drills were bloodless battles; its battles bloody drills.”(Josephus, - “The Jewish War”).

Considering that marketing often absorbs quite a lot of investment in order to produce profitable revenue, its efficient organization ought to be of major importance. But just how well do marketers organize their departments and their activities? If the principle marketing executives happened to fall under a bus, how well would the business function without them? How easy would it be for someone to seamlessly take control over the marketing decision making and management?

Marketers rarely admit to having all the resources that they think they need, but how well do they use the resources and assets that they have? How well organised are marketers’ assets and processes to achieve their marketing objectives? As with any activity, if marketing operations are directed to achieve specific objectives, all the resources will require organizing accordingly.

Marketing involves all those activities which directly or indirectly produce the necessary income on which a business depends. The task of chief marketing officer (CMO) is to maximize the level of profitable income while minimizing costs and the use of assets.

Because marketing involves many diverse activities and disciplines, such as research, sales, advertising, promotion, planning, it is essential that all its resources are managed efficiently and effectively, It is therefore the responsibility of the CMO to direct the effective organization of assets, finance and especially, personnel.

The principles for the organization of the marketing function are no different from
those of other business areas and disciplines. A business organization tends to work best when its structure is:

* formal
* simple
* flexible and capable of adaption to meet changing requirements.

Marketers need to understand that the marketing function does not stand or operate in isolation from the rest to the business, but is an integral part, responsible for producing the income on which the business depends for its existence. It is therefore incumbent upon the CMO is to ensure that all the marketing staff, understand how the rest of the business is organized. They need to know how the various functions and departments are subordinated, what their functions and responsibilities are, and the identities of the principle personnel. Marketers should have a similar understanding of how their own department functions, especially concerning who has what responsibility and authority.

Each member of the marketing staff should have a clear job description. This should not be prescriptive, but should define their subordination, principle tasks, responsibilities and authority. CMOs need to ask:

* Do all marketing staffs have clear objectives, both individual and collective?
* Do they also have clear lines of responsibilities, communication and authority?
* Are all these clearly understood by all the marketing staff?

While businesses put considerable effort into developing an annual marketing planning process, in many businesses, much less effort is put into ensuring that there is an effective organization to carry it out. As with most business functions, marketing staffs tend to work better when there is a clearly under stood routine of activity. However, one of the most important aspects of any business or marketing structure is to be able to cope with changing conditions, and especially unexpected events. Efficient internal communications can ensure that all marketing decision makers are informed of all current and planned activities. This is especially important when marketing staff leave or are absent, so that others are able to take over their workload to maintain the continuity of actions.

Marketing plans are not simply a blue print for using marketing resources and investment to achieve specific marketing objectives. Quite often businesses leave out the most important aspect of business and marketing planning, which is how to deal with the unexpected event. How many businesses actually have a contingency plan for such occasions? What do the marketing team do if the projected sales do not come in as planned? What actions are to be taken if the revenue is below what was planned? Or what should be done if demand is outstripping supply?

The Roman Army was trained and organized to meet every eventuality, both expected and unexpected. Marketers must similarly organize themselves and their resources in order to deal with any change in market conditions or circumstance, and especially any unforeseen event. Being well trained and organized will help to ensure that the level of developed income can be maintained without interruption, despite changing conditions and unexpected events.

© N.C.Watkis, Contract Marketing Service 19 Oct 09
Contract Marketing Service, (Marketing Performance Consultants)

The Only Marketing Question the CEO cares about

2009-09-03T15:32:00.000+01:00

Looking at the marketing press, would suggest that the main priorities of marketers are brand, the return on investment for advertising and promotion, and customer relationship management. While these subjects are laudable areas of interest and concern, they are not the true purpose of marketing.

The Chartered Institute of Marketing (CIM) defines marketing as being, “the management function of all those activities which anticipate and satisfy customer demand profitably.” From the CIM’s definition, it is clear that the purpose of marketing is the production of profitable income. Thus the marketing function has the clear responsibility of producing the income for the business. The priority of every marketer must therefore be to maintain and increase the flow of profitable revenue, by anticipating and satisfying customer demand.

The chief marketing officer’s (CMO) task is to maximize sustainable profitable income, while minimizing costs and the use of assets. Managing the marketing function is a complex business. Balancing all the activities related to product, price, promotion and market to produce levels of income both for the present and the future is not an easy task, and it is easy to become side-tracked into detail and lose sight of the objective.

Developing market share and brand image are important, as they help to provide a security of income by a status and position in the market place. However, market share and brand image are only a means to an end, namely to produce sustainable income for the long term future of the business. A business may have a substantial market share and a strong brand image, but unless the marketing function is delivering sufficient profitable income, the business may fail.

Marketers need to be able to control all the assets at their disposal efficiently and effectively in order to produce and maximize sustainable revenue. Being able to micro analyse every aspect of an advertising campaign, market research, or customer relationship management, may be important, but is it relevant? The marketer must be clear to the purpose of the information obtained and be able to determine:

* How much time and money has been spent?
* How does it help with income development?
* Whether the information obtained more or less than is necessary for decision making?

If the information collected from analysis does not demonstrably assist in producing income, it is a wasteful distraction. Marketers need to consider and judge every marketing activity in relation to how they contribute to producing income.

The chief executive officer’s (CEO) main interest is the amount of profitable income generated collectively by all the marketing activities, and how the net profit of the business as a whole may be maximized and continued into the future. At the same time, the main interest of the chief financial officer (CFO) is to ensure that the budgets have been adhered to, and that the costs and use of assets have been kept to a minimum.

The chief marketing officer (CMO) should always be able to demonstrate effective process and accountability for all marketing activities, costs, investments and decision making.
As the late Deng Xiaoping of China is reported to have said, “It doesn’t matter if a cat
is black or tabby; if it catches mice, it is a good cat.” Provided the marketing function has met the financial and marketing objectives of the business and marketing plans, kept to the budget, the company policy and the law, why should it matter in the detail of how this is achieved? Marketers need to accept that while it is desirable that all activities should be measureable, in practice, many marketing activities cannot be measured accurately and that a level of inaccuracy or uncertainty has to be accepted. Marketers have to decide whether investing more time and money into assessing the return on investment on aspects of advertising CRM programs and consumer research really assists in maximizing profitable revenue.

The only marketing activity that actually produces income, is that of “Sales”. All the other marketing activities of advertising, promotion, research, customer relationship management (CRM) etc, are there to support “sales”. Because they are supportive to sales, and have no direct out comes, measuring their contribution and return on investment will always be difficult and of limited accuracy. Therefore assessing the correct level of investment and return must always be subject to a level of judgement. Provided that each marketing activity is maintained within its defined budget and those parameters which can be accurately measured, further analysis is likely to by unproductive and futile.

Everything comes at a cost. Income is not freely given by the consumer to the supplier. The supplier has to work for the income by finding suitable customers, understanding what the customers need and providing what they want in a form for which the customer is willing to pay. Marketing performance should be measured by results. The only results that actually matter to the CEO and CFO are the amount of income produced by the marketing function, and the amount of money and assets used in getting it.

When it comes down to it, the only marketing questions that have any real importance to the CEO and CFO are: how much profitable revenue has been achieved? How much does it cost to find and obtain the income? How can the income be sustained for the long term?

When did you last see your marketing plan

2009-08-25T15:31:00.000+01:00

For many businesses both large and small, the marketing plan is just one element of the annual round of the planning process. Depending on the culture of the business, that planning process precedes or follows the annual budget.

In some organizations, it is not unusual for the budget to be set first, followed by the planning process. When this happens, the budget may be set by the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) in an apparently arbitrary way, which is often based on an extrapolated increase or decrease in income, costs and investment. The new budget is then announced and managers are expected to plan accordingly. Surprisingly, there are a number of successful companies that perform in this way. However, making a budget without a proper appreciation of the current and prevailing marketing situation, means that at best, the budget will probably be set too low. This could mean that while the business achieves its targets, it may well be performing at less than capacity. At worst, when set in this way without relation to the marketing resources or prevailing market conditions, the financial objectives may be beyond the capability of the business to achieve them.

The Chief Marketing Officer (CMO) is responsible for producing the income of the business through the anticipation and satisfaction of customers’ demand for its products or services. How much income the marketing function produces, depends in part on the state of the market, in terms of the level of demand, as well as the customers’ ability and desire to purchase. In addition, the suitability of the product or service to meet the requirements of customers, the strength and activity of competitors, as well as the ability of the marketing organization to find potential customers, and complete profitable sales, are all fundamental in achieving the financial and marketing objectives.

It is unfortunate that for many executives, business and marketing plans tend to be seen as annual rituals, rather than working documents. For the marketer, the marketing plan sets out the financial objectives in terms of the expected level of revenue, and the return on investment. The plan should also outline the marketing strategy to be employed, the sales actions and sales support that are required, and the financial resources available for costs and investment. If marketing plans are set out properly, they will have clear achievement requirements at regular points throughout the year, so that progress may be assessed and verified. However, the current state of world markets may be described as volatile, so that as the Chinese say, we live in “interesting times”. While the marketer must continually measure performance against the marketing plan, it is also important to consider the plan in relation to developments in the market. It is especially important to understand how market conditions and financial constraint affect customers and their ability and willingness to continue to buy. In these circumstances, what should the marketer do?

The first thing that the marketer should do is to look at the planned marketing objectives and assess whether they are still valid in the present situation, and if not, how they may have changed. The business is dependent on marketing achieving the desired level of profitable income, but with changed market and economic circumstances is this still possible with the existing plan? Are sales targets likely to be achieved from the principle customers, or have their requirements been deferred or no longer needed?

“No battle plan survives contact with the enemy” and the same may be said for business and marketing plans. As soon as marketing plan is put into action, it requires change and development to meet changing market conditions. In the current business climate, marketers must expect business conditions to be changing, perhaps quite rapidly, and therefore they need to be continually revising their action plans or if necessary enacting pre prepared contingency actions. While constantly re-appraising the marketing plan, marketers need to be able to answer the following questions:

* Is the money coming in as planned? If not, - why?
* Are the principle orders likely to be confirmed as planned?
* Are customers intentions still valid, - how do we know?
* Will the contingency plan need to be enacted or is it already in operation?

Both the business and marketing plans should not be just annual rituals, but working documents in constant use, defining the route to take a business from where it is to where it has to be. For the marketing plan, the only elements that should be fixed are those of the marketer’s financial objectives, and possibly the business and marketing strategies to be employed it their achievement. But to be useful, the plan must be constantly updated, in the light of market conditions and business success. The actions, by which the marketer produces sustainable business income, may be subject to frequent change. Ignoring the marketing plan, especially in times of market volatility, means that resources are unlikely to be used efficiently, and objectives, especially in terms of financial revenue are less likely to be achieved.

© N.C.Watkis, Contract Marketing Service 14 Jul 09
Contract Marketing Service, (Marketing Performance Consultants)

PARLIAMENT’S LESSONS FOR MARKETERS

2009-06-29T15:29:00.000+01:00

For several weeks, the newspapers have been full of revelations about members of Parliament their allowances and expenses. As a result of these revelations, several MPs are having to resign, some will be deselected by their constituencies, and some may even be subject to criminal investigation. The standing of MPs in the eyes of the British public has never been particularly high, but their image has now sunk to rock bottom so that many are regarded with contempt. It is a serious matter, because while the public believe in Parliament, they have lost faith in the integrity and judgement of MPs, to legislate on their behalf. It is quite obvious that some MPs were more interested in what they could get out of the system, than what they could contribute. The comparison of the high claims of MPs, with their voting attendance, makes interesting reading.
What has gone wrong? The underlying causes seem to be that MPs both individually and collectively, appear to have:
* Lost sight of their purpose and developed self interest
* Concentrated on short term objectives
* Failed to see consequences of their actions
* An inability to see how their actions are perceived, regardless of legality or intentions
* Failed to understand the perceptions of the electorate
But what has this got to do with marketing and marketing management in particular? In fact, there are quite a lot of lessons to be learned from this sorry saga, which apply to marketing management and business in general, especially during a recession. At such times, there is a danger that with falling demand and revenues, marketers and other executives are inclined to develop short-term thinking, which manifests itself in:
* Losing sight of purpose of the business
* The development of self interest for self preservation
* Concentration on short term objectives
* Failure to see long term consequences of actions
* Inability to see how actions are perceived regardless of legality or intentions
* Failure to understand the demands of the customer.
The objective of the Chief Marketing Officer (CMO) is to produce and maximize the profitable monetary income for the business. All marketers involved in the marketing organization are responsible for their contribution to maximize the level of profitable income. However, maximizing profitable income is not for the short term, but must be sustainable for the long-term. At the same time, the emphasis is on maximizing profitable income, so there is also the objective of minimizing costs, investment and the use of assets.
For most markets, demand usually slows during a recession. What this means, is that customers defer buying decisions until a later date, which slows the flow of revenue to the business. The reason customers buy products is not really for the benefit that they receive from the product or service, but for the fear of a problem unresolved, the work involved or the potential danger they face, if they do not have the benefit of the product or service. However, it should be remembered that demand has not gone away, but it has been deferred. The danger for a business is that if circumstances change, then the customer may cease to have a need and thus the potential sale is lost.
With the possibility of slowing sales and thus falling demand, what actions should the marketer take? Initially, the marketer needs to understand the current market environment, especially how customers are reacting and the problems that the customer is facing, only then can effective actions be taken for the immediate and long term benefit of the business. The immediate questions that need to be answered are:
* How are customers affected by the recession?
* Is their demand deferred – if so for how long?
* Have their priorities changed?
* What are their current problems?
* What are their fears?
* What assistance do they require?
The best way to illicit this information is by direct face to face contact with a customer or potential customer. In this case, the business with a direct sales force has a distinct advantage in customer relations, over the company that relies on web-sales or non- traditional selling methods. Answers to these questions may require a revision of sales expectations and cash-flow projections. In addition, the answers may suggest that when demand slows, for whatever reason, the sales and marketing communications message may need to be refined.
* Is the current marketing communications message suitable for current market situation?
* How can the sales message counter the deferment of buying decision making?
* What are the customer’s fears that influence the purchase?
* Without playing on customers fears, which would be counter-productive, what benefits can be stressed, which the customer might fear to lose by delayed decision making?
If marketers are to have credibility, they must develop and retain long term thinking while enacting effective short-term actions for the long term benefit and future of the business. Customers need to trust and rely on their suppliers, and suppliers need to understand and trust their customers. Developing and maintaining good customer relationships is essential for the continuity of every competitive business, and especially so during a recession. The example shown by Parliament of its relations with the electorate, is the antithesis of good customer relations.

How Much Marketing do we need?

2009-05-26T15:27:00.000+01:00

How much marketing do we need? This is the sort of question that can be asked by the chief executive officer (CEO) or chief financial officer (CFO) if the role of marketing in their business is undefined or misunderstood. Despite all the evangelising by the Chartered Institute of Marketing (CIM), on the role and contribution of marketing to business development and profit, it is still the case that for a large part of the business community, sales and marketing are considered as two different business areas, with marketing as another name for advertising and promotion. Unfortunately, many marketers have acquiesced with this misunderstanding, by cultivating the idea of creative mystery and eschewing performance measurement and accountability.

In the course of every recession, businesses always look to become slimmer and fitter. During the years of growth, businesses tend to expand their organizations to a greater or lesser degree. However, smaller businesses tend to retain their lean organization owing to more limited resources. In many smaller companies, the marketing staffs comprises the sales organization with perhaps one other person responsible for providing marketing expertise in the form of essential sales support.

For larger businesses, where the marketing function has expanded into various specialists sections or departments, such as customer relationship management, advertising, public relations, research and planning, the current economic situation may provoke a reappraisal of the marketing requirement. Just how big should the marketing organization be? How much does it all cost? What does it contribute to the business? Is it all necessary?

Every chief marketing officer (CMO) worth their salt should know what every part of their marketing organization costs, how much investment it absorbs, and most importantly what it contributes to the business. If CMOs have such information, they should be able to demonstrate how marketing resources and investment are used and what collectively they return, in terms of profitable revenue. At the very least, they should be able to show the cause and effect of general cost cutting and its potential effect on the level of revenue,

Whether one likes it or not, cost cutting and reorganization, may be the order of the day dictated by the CEO, and the CMO will have to find ways to implement it. But before embarking on a cost cutting exercise, it is important for the CMO to remember that the purpose of the marketing function is to maximize sustainable profitable revenue, and to achieve this with the minimum of cost and investment. All the activities of the marketing function should be examined on the basis of cause and effect, considering what would be the overall effect on the marketing effort and the business as a whole, if a particular activity were to be reduced.

Trying to ascertain the result of say, a five or ten per cent cut in investment in any particular marketing activity, may be difficult. However, if the internal costs of providing a particular marketing activity or service are known, it may be worthwhile to establish the costs and potential savings to be made by sub-contracting or out sourcing that activity. However, it should be remembered that although out-sourcing may have short-term financial benefits it may also lead to a loss of knowledge and expertise that may create problems in the future.

For the marketer, the most difficult areas of marketing to evaluate are those where there is no direct measurable outcome, which tend to be those areas of sales support. The input and output of the sales organization, including direct as well as web based sales are relatively easy to establish, but what about the advertising department and the public relations function? Effective advertising can be essential to maintaining sales or making opportunities for the direct sales force. At the same time, advertising can be expensive and wasteful. If advertising is handled internally, perhaps it would be more cost effective and productive to use an external agency with a clear objective and budget? Public relations can be the most cost effective way of informing the market and potential customers, but it can equally be expensive and time consuming with no guarantee of successful results.

The job of the chief marketing executive is the efficient management of marketing resources and investment, in order to maximize the amount of sustainable profitable revenue for the lowest level of cost and investment. It follows that marketing departments should be as small and flexible as possible, with marketing specialists only employed as necessary to manage outside specialist agencies.

Before the revolution in office Information Technology (IT), marketing departments required more people, as all sales records, analysis, market research and financial analysis had to be done largely by hand or with the aid of an electric calculator. The IT revolution now enables marketing activities, such as developing spreadsheets and market projections, that used to take weeks to prepare to be done several times in an hour. The result is that while direct sales teams still have to be of sufficient size to meet with the size of the customer base, the rest of the marketing organization can be quite small.

Financial restriction may also provide an opportunity to reorganize the marketing function, rationalizing the functions of sales, sales support and customer support, into an integrated and effective marketing organization. Reorganization and rationalization does not necessarily produce cost savings, but it does encourage the efficient use of resources and investment to produce the sustainable profitable revenue required by the business.

What do we do now?

2009-04-21T15:26:00.000+01:00

In a recession, demand slows, and the first action of most businesses is a round of “belt tightening” involving cost cutting. This is understandable, because the priorities of the chief executive (CEO) and financial officer (CFO), are to secure the financial assets of the business and reduce the outgoings. While this may be regarded as prudent initial first aid in helping to protect the business, it does nothing to maintain it. Reducing the outflow of cash is important, but more important is to maximize the sustainable income, without which the business will die. Too often, in their concern to cut costs CEOs and CFOs effectively strangle the resources which are there to generate the necessary income on which the business is to survive. Why is this? Marketing is responsible for producing sustainable revenue necessary to maintain and develop the business. It is therefore the responsibility of marketers to demonstrate their contribution to the business and show how investment should be used to produce the required income.
The first requirement of the chief marketing officer (CMO) is to reappraise the current marketing and business situation. What is the financial state of the company? What is the cash flow position? What is the ratio of current assets to liabilities? By doing this the marketer will know what financial resources will be available for future business development. All this information should be readily available but it could also provide an opportunity to demonstrate an interest and understanding of the necessary financial affairs of the business.
As in previous recessions, marketers are required to do more with less and in the past, most managed to muddle through. However, the changes that the economic environment has undergone since the last recession and the nature of the present one, suggest that relying on past survival actions may not be enough. In previous recessions, marketers often concentrated on customers and markets that had been historically profitable. However, now that the world’s economic situation is often affecting customers and markets in unexpected and different ways, this approach may prove unreliable.
Marketing has evolved rapidly over the past decade, with traditional media declining in importance as the Internet and social networking have increased in size. CMOs, trying to rationalize their media spending, need to consider this new balance when redrawing their media plans, rather than just relying on the more traditional press and television.
A common approach in the past has been for marketers to cut costs by cutting the office sales support overhead, while maintaining the outside sales staff. However, an increasing number of companies are now relying on more integrated sales operations, including internet sales, direct mail, and other methods, as well as a direct sales team. Simply cutting the staff overhead may damage customer relationships and ultimately the revenue stream.
If marketers are to survive this or any recession, they will need to clearly identify the profitable customers and markets before prioritizing the most effective marketing methods for reaching them. In the current situation of the global economy, demands are changing with unprecedented speed, for example in many parts of the world the demand for new cars has collapsed in a matter of months. Such uncertainties require the constant attention of the marketer, with strategies that anticipate and respond to changing market conditions. It may no longer be sufficient to concentrate only on those customer groups and market areas that were previously profitable. Multinational companies will need to reassess their business, country by country, as almost every country is affected to a greater or lesser extent by the world economic situation, and any forecast made, even in the last six months, is likely to need revision.
For many national and international consumer companies, the profitability of different regions has changed rapidly, forcing many of them to reallocate marketing resources, accordingly. CMOs of business-to-business (B2B) companies will also need to re-examine the opportunities and risks of every one of their customers, especially regarding their long term cash reserves and liquidity.
Marketers should be aware of how the economic climate affects all aspects of their business, whatever its size. In the current business climate, marketers must ask themselves a number of questions:

* Which market segments provide most of the business?
* Are the main customers of the past likely to remain as important in the future?
* Have the demands of the market changed or are they likely to do so in the foreseeable future?
* Where are the best customers likely to be?
* How are prime customers to be qualified?
* Is the product or service suitable to the current customers?
* Does the product or service meet the economic requirements of the current market?
* How do we know?
* What is the media mix for advertising and promotion?
* How has it changed?
* Is the traditional mix still suitable for the present situation?
* The current pricing policy suitable for current market conditions?
* Would cutting price stimulate demand?
* Are the credit and payment terms suitable for the present time?

As professional marketers we are again in what the Chinese call “interesting times”. By staying alert and responding accordingly to the rapidly changing opportunities and threats posed by a volatile economic situation, marketers will provide the key to business survival and future growth.

When the Going Gets Tough

2009-03-10T15:23:00.000Z

Business life is getting tough. The days of credit, sales growth and benign economic environment are over, at least for the time being. Now, survival of the fittest is the order of the day.
Business will have to adapt to survive or as in nature, be replaced by new businesses. People forget and some have yet to learn, that a recession is not a new phenomenon; - we have been here before. Recession is a normal part of the business and economic cycle. Some cycles are long and others short, but they all end in some type of recession as the market corrects itself.
For marketers, a recession is a particularly difficult time. Demand can be seriously reduced, to the point of appearing to have dried up altogether. But while demand may have appeared to have evaporated, in most cases, demand has merely been deferred. Customers, be they private consumers or business organizations still require the goods and services on which they depend. Uncertainties may make consumers slower to make decisions and buy, but it is only a matter of when they buy, not if. It is therefore down to the marketer to prepare for that deferred purchase.
Companies need to understand that getting and maintaining business costs money. However, the first inclination of Chief Executive Officer (CMO) and Chief Financial Officer (CFO) in a recession is to cut costs, and one of the first targets is usually the marketing budget. This is because marketing is often confused with advertising, and is often only partially accountable for its costs and investments, a position that too many Chief Marketing Officers (CMOs) still find difficult to defend satisfactorily. However, it is the responsibility of the CMO to generate sustainable profitable revenue for the business. Thus the CMO must be able to clearly explain what it is they do, and the contribution that marketing makes to the business, especially in quantifiable terms. Marketers need to remember that in a business organization, finance is king, and that numbers speak louder than words. Talking about brand and image is of no real interest to the CEO, but the financial contribution that the marketing function makes to the business most certainly is.
Marketers need to decide which is more important, the marketing department or marketing? This may seem a pointless question, but when revenue is down, cost management becomes increasingly important. Marketers must look at every aspect of the marketing budget and consider how it contributes to the overall generation of revenue. In good times, marketing organizations tend to grow, often developing into small empires that their leaders want to defend.
If costs have to be rationalized, then salami slicing across the marketing function is generally a bad policy. Much better to rationalize those processes and activities which are insufficiently productive, and use their resources to bolster successful investment elsewhere, based on a full understanding of the contribution of each separate marketing activity.
While advertising is often an easy target for cost cutting, it is still an essential aid to opening doors to the client and preparing the way for a successful sale. Hence the need for advertising to be at least in part measureable in its contribution sales development. Is the advertising program achieving its objective? If not, then how should it be changed? Is every marketing activity still relevant to the current business situation? What does it achieve? How do we know? Are there more cost effective ways of achieving the same end?
In a recession, it is essential that marketers are pro-active, and not just reactive to questions from the CEO or CFO. Marketers must prepare themselves, ensuring that they are familiar with the company business plans, objectives and strategy. They need also to have a full understanding of the business’s financial position and any financial actions that the business is required to take. Any change in the marketing objectives, resources and investment must be clearly understood. It is in the marketers own interest not to save sacred cows, but to be ruthless and decisive in removing unproductive areas of marketing activity, if they cannot be shown to make demonstrably adequate contribution to the generation of profitable revenue.
Experience shows that it generally takes more effort to produce sales and revenue during a recession, and therefore not only is a simple cut in the marketing budget counterproductive, but there may even be a necessity for the budget to be increased.
Market research may be needed to examine changing customer requirements to meet current market conditions. Product and services might require development to meet changed customer requirement. Advertising and promotion could also be changed to maintain or increase effectiveness, but certainly not stopped. The distribution systems must be cost effective, while meeting the customer needs. Pricing structures, together with credit and payment terms should be re-assessed in the light of current trading conditions and the changing requirements of both the business and the customers.
In a recession the role of the marketer is fundamental to business success and survival. Marketers must recognize that getting revenue will cost more and take longer than in better times, but while it is the CFOs responsibility to manage the necessary financial resources, it is the CMO’s responsibility to use those resources efficiently and effectively to generate sustainable revenue and to do so demonstrably.

Warning Indicators for Marketers

2009-02-03T15:21:00.000Z

Do marketers really understand the business that they are in? The question is not about marketing, but about understanding the business organization of which they are an integral part.
For marketers to do their job effectively, that is, to maximize sustainable profitable revenue, they need to be aware of the market and economic environment in which they operate. Understanding the state of the market and economic environment in which their business operates is fundamental for the marketer. But marketers must also be aware of the economic health of the business in which they work. What about the economic state of the business? How well is the business performing, and how do we know? How much is being invested in getting and retaining business and what return is being made on that investment?
Marketers must ask questions about the condition of the business and its ability to weather any economic or market storm. Forget about brand, image and market share, for the time being, for while they remain important, the marketer must look for those indicators that show of the health of the business and where problems may be arising.
What indicators should the marketer look for? The first indicators are for the financial strength of the business. An examination of the balance sheet will show how the assets and liabilities are balanced, from which the ability to pay creditors may be derived. This is done by calculating, what is known as the Current Ratio for Liquidity.

The Current Ratio for Liquidity, defined as the current assets divided by current liabilities. “General opinion” considers that ideally, the Current Ratio should be 1:1, so that assets should equal liabilities. When assets are larger than liabilities, it is generally considered that the assets are underused. However, when its assets are less than its liabilities, a business is generally considered insolvent. The immediate liquidity of the business, which is the assessment of its ability to pay its immediate creditors, is measured by the Quick Ratio or “Acid Test.” The Quick Ratio is defined as the current assets less stock, divided by the current liabilities.

While these two ratios are good initial indicators to the financial health of the business, they are relevant only at a particular time. Neither the Current Ratio nor Quick Ratio relate to a business’s trading state, marketing position, management resource, workforce or intellectual property. However, while the Current and Quick Ratios provide initial warning signs concerning the overall health of the business, it is important that marketers should know what other indicators they should be looking for, regarding the marketing or trading strength of the business.

If marketing managers are managing their resources responsibly, they should be continually looking at a variety of marketing performance indicators, which will quantify performance in a number of specific and significant areas. In reality, many businesses fail to do this. Therefore the marketer needs to know which key indicators may act as warning signs of inefficiency and under achievement.

The prime task of the Chief Marketing Officer (CMO) is the generation of sustainable profitable revenue, thus the most obvious initial performance indicator, is the current revenue trend. The comparison of revenue levels at different times soon shows the general trend of income, as do the complementary data for units of sales over the same period.

The balance between production and sales is indicated by movements in stock turn. If stock turn is slowing, it indicates that production is starting to outstrip demand, which may store up problems for the future, particularly with cash flow. If the conversion rate from enquiry to order starts to reduce, then it is important to examine the trend in the levels of enquiry, as well as the time taken between an enquiries and orders.

The trend in calling rates for sales staff can be an important indicator especially when related to trends in the conversion rates of enquiries to orders, and order to sales.
Regular checks of the customer base and order frequency will indicate movements in customer attrition and the maintenance of the customer order base. Any shrinking order base requires the definite attention of marketer.

Since marketers are responsible for the production of revenue, they need also to be aware of the level and trends of bad debt and late payment. These two indicators show whether the money promised by the level of invoice sales, actually turns into the necessary cash revenue, and may highlight a need for changes in credit and payment terms

The indicators listed here is not exhaustive, as there are many others, which may be significant to particular businesses and industries. Used regularly, the right indicators can provide timely warning of emerging problems. It is then down to the marketer to devise actions to counter negative activity, or engage alternative actions to meet the objectives of the marketing plan.

© N.C.Watkis, Contract Marketing Service 27 Jan 09
Contract Marketing Service, (Specialists in Measuring Marketing Performance)

Where is the Contingency Plan?- A Marketing responsibility

2009-01-06T15:20:00.000Z

The findings of the survey of the 2008 Global Strategic Reward survey by management consultancy Watson Wyatt, makes interesting and alarming reading. The consultancy spoke with 1,389 organizations in 37 countries about what, if any, contingency plans they had in place in the summer of 2008, to cope with the possibility of an economic downturn.
Despite the facts indicting that the current credit crisis has been developing for at least a year it is surprising that 32% of US businesses did not have any contingency plans to deal with an economic slowdown. One in five UK companies (21%) had made no contingency plans ahead of the current financial crisis for managing their workforce during an economic downturn. The percentage of European companies without a contingency plan was similar.
While the figures vary across Europe, the survey showed that of all the firms surveyed ,13% of German, 15% of Irish, 18% of Italian, 25% of Dutch , 26% of Swedish and 43% of Spanish firms had not made any contingency plans. By contrast all the French firms surveyed, had prepared contingency plans for an economic slowdown.
The whole purpose of business and marketing plans is to prepare for the expected and intended, but equally for the unexpected event or conditions whether good or bad. The question must be why, when the economic indicators have been there for all to see, have so many companies not prepared themselves and planned for the possibility of a rapid change in the economic climate?

For many business planners and marketers, the preparation of business and marketing plans is such a protracted affair, that the idea of preparing contingency plans hardly comes into it. Yet the “what if “question, is vital if plans are not to be thrown into disarray when events turn out differently from that which was expected. Marketers have the responsibility to deliver sustainable profitable revenue to their business. It is therefore incumbent upon them to identify potential problems in the market and the economy and to prepare accordingly. How should they do this? The various quality economic surveys are a prime source of information, as are Government reports, the Bank of England, and economic forecasts from the principle financial institutions and banks. Collectively these can provide good indicators of the economic climate and its future. In addition, statistical information regarding trends and activity in the relevant market sectors is important, as this sets out the forecast of the prevailing trading conditions in the immediate future.
If the preparation of a business or marketing plan is completed properly, the process will require an analysis of the strengths, weaknesses opportunities and threats( SWOT) that effect the business. Strengths and weaknesses are confined to that of the organization in relation to its overall performance in the market and against the competition. Opportunities and threats cover those external factors which affect the business e.g., Health and Safety, economics, legal aspects, as well as those that are seen directly effecting marketing such as competitor activity and market trends. Additionally, opportunities and threats relate to Political, Economic, Social and Technological factors that can effect the business Assessing the nature of these factors is generally carried out through a PEST Analysis. PEST (Political, Economic, Social and Technological) is used to describe the framework of analysis of the external macro-environment in which the firm operates and assess the potential risks to the business or marketing plans. Marketers should then have an understanding of the external risks to their plan, and consider the “What ifs”. What if the principle contract of this year’s revenue does not come in on time, or what if you fail to win the contract? What if the economic slow down reduces demand? How will the hole in the revenue plan be filled? What actions will have to be taken and by whom? When do you have to confirm contract success or failure in order to make good the revenue plan?
Business and marketing plans are essential working tools for effective management, to ensure that assets and resources are used effectively to achieve the objective and should not be seen as a tedious annual event. Used properly, the business and marketing plans should be in continuous use as a working management tool, being regularly reviewed and revised to meet changing conditions, so that resources can be moved effectively when the unexpected happens.
If all companies had drawn up their business and marketing plans properly earlier this year or even last year, then the possibility of the credit squeeze and recession should have been recognized, as all the signs were there, even if they were thought remote. Based on those possibilities marketers should have prepared contingency plans to deal with the situation. Over the next few months it will soon become apparent which marketers prepared and implemented effective contingency plans and which did not. If businesses have failed to make effective contingency plans to deal with the current economic and market situation, then marketers must take a major part of the responsibility, as theirs is the task of maximizing sustainable profitable revenue.

(844)© N.C.Watkis, Contract Marketing Service 15 Dec 08
Contract Marketing Service, (Marketing Performance Consultants)

MARKETING in 2008 - a personal view

2008-12-01T15:18:00.000Z

When asked to write about the marketing concerns during the past year, I considered that a review of the various topics in the “marketing press” would give a good indication of the main interests of Marketers in 2008.
If the “marketing press” is a true reflection, it is apparent that for the majority of marketers the subject of brand is and has been all important, particularly relating to market share, brand image, and the “added value” of the brand. Now while brands have an importance, for most people involved in marketing this is not the case. Roughly eighty per cent of business is run by small companies, where market share and image in relation to “Brand” have limited importance, but where the image and reputation of the company are vital. For these businesses, success is measured in revenue, not in brand image or market share. Someone said that “Brands are for cattle”, and while brands have an importance in product recognition and reputation, brands do not of themselves generate revenue. The importance of brand image is probably more limited than many marketers would like to admit, as the continuing rise in the success of own label products, indicates that concentrating on the “image of the brand” is not enough when it comes to producing actual sustainable and profitable sales revenue.
Customer Relationship Management (CRM) and all its attendant software continued to remain a prime interest for marketers during the past year. Concerns still remain on whether investment in CRM is cost effective, with some businesses claiming disappointing results while others indicate its growing importance and usefulness in their respective businesses. What is apparent, is that the CRM market is awash with competing products with little obvious differentiation. This makes it difficult for the marketer to make informed decisions about selecting a suitable product in which to make potentially large investments in time and money. Disappointments in CRM program performance, often stems from an initial requirement which was unsuitable or ill thought out , expectations that were unreasonable, and the selection of unsuitable CRM products. Marketers still need to quantify and evaluate their CRM requirement if they are to select the right product and get the best out of a CRM package which may be particularly useful in specific consumer related industries.
Websites are of growing importance to business in general, as is shown by the increase of 16% in online sales in Britain over the past year, together with a corresponding rise of the online advertising market. Online advertising now has a larger percentage share of the media advertising market than national press advertising. Marketers will need to fully understand the dynamics of online advertising and business if they are to maximize its contribution to developing future sales revenue.
The importance of marketing has again appeared in the press as an area of concern and interest to marketers. At the beginning of the year, the CIM continued on its quest to define or redefine marketing. While this subject may or may not be of particular importance to professional marketers, not least members of the CIM, it is generally obvious that in non marketing quarters the subject is of little relevance. However, the image that marketers and members of the CIM give of themselves about trying to redefine what they actually do, by seeking to redefine the CIM’s generally accepted definition of marketing, suggests that if marketers cannot define what they do, they can hardly be expected to be taken either seriously or to express the importance that marketing has for every business. If marketers cannot be clear about what they do and quantify their contribution to the business, they will be regarded as an irrelevance by the commercial world. Navel gazing by marketers about marketing is bad for the profession and its image in general.
Continual Professional Development (CPD) is an area that has been highlighted several times during the year, to show its growing importance. In reality, there is nothing new in marketing. Old knowledge gets forgotten as new markets and trends arrive, but it is then re-discovered in a new guise. Marketers need to reappraise old knowledge, which may be new to them, but which is suitable for different times and conditions. However, the one area where there is always new knowledge is that of legislation. Marketers, especially those involved with consumers must ensure that they are up to date with all the legislation which impinges on their work or their markets. Ignorance of the law is no excuse, but while the law may constrict marketer’s activities, it can also provide new opportunities and new markets.
Despite all the warning signs which have been around for those who wanted to see them for at least twelve months, the words credit squeeze and recession do not seem to have featured much in the marketing press, and therefore perhaps not in the minds of many marketers. The sudden down turn in business has taken many companies by surprise. How many marketers have prepared a “plan B” in their marketing plans for just such a change of conditions? No doubt many will be looking to get more out of their marketing budgets with reduced resources, while many others may be looking for new jobs.
The end of 2008 and the beginning of 2009 will mark “interesting times” for all marketers. Marketers are responsible for finding, securing and maintaining the income on which their businesses depend. If those businesses are to survive the recession, marketers will have to concentrate more on achieving in revenue targets, than on debating the merits of brand image or professional status. By achieving the revenue to sustain their businesses, marketers will demonstrate their importance to business success and increase the status of their profession.

© N.C.Watkis, Contract Marketing Service 11 Nov 08
Contract Marketing Service, (Marketing Performance Measurement Consultants)

Recession - Making Marketing Count

2008-10-28T15:17:00.000Z

There is now a general recognition that a recession has arrived in the wake of the credit crisis, which will manifest itself in both a slowdown in demand and business in general.
The usual reaction of companies to this situation is to batten down the hatches and to look for cost cuts and budget reduction.
Those in charge of the marketing budget are often seen as the first in line when it comes to cost cutting, but should this really be the case? How should marketers respond when asked to make cuts in expenditure?
Marketing is defined as “all those activities which anticipate and satisfy customer demand profitably”. Thus the marketing function of any business has the responsibility of producing all the profitable revenue for the business, using all its activities to anticipate and satisfy customer demand. In those businesses where the sales function is managed separately from the rest of “marketing” there is still usually an executive with overall charge of “sales and marketing”.
For the Chief Marketing Officer (CMO), the executive in charge of all marketing activities including sales, the objective is to maximize sustainable profitable revenue while minimizing costs and the use of marketing assets. Thus the marketing function is the driving force for any business in producing and maintaining the levels of profitable revenue.
At a time when demand is reduced, everyone has to work harder and maximize efficiency to ensure the continuing production of the necessary revenue. It follows that arbitrarily cutting expenditure on all those activities involved in getting and maintaining business may damage the ability to produce revenue, especially at a time when competition is likely to strengthen when demand is weakening.
The successful marketer or CMO needs to be both creative and effective in managing resources. This is particularly important in times of economic and market astringency. The CMO needs to be able to analyse all marketing activities with quantified performance measurements. As an effective manager, the CMO should be able to justify all elements of the marketing budget with quantified evidence of its contribution to revenue production. Marketers must be able to identify those activities which are the most cost effective in marketing contributions and which are not. If necessary, resources should be redistributed to concentrate effort on those areas which provide the best return on marketing investment. Always must be asked the questions; is this an investment or cost? What does it contribute? How do we know? If this action was cut or reduced what would be the consequences? How do we know?
A full understanding of the cost, benefit and contribution of all marketing activities to the generation of sustainable profitable revenue gives the CMO a strong position when defending against arbitrary budget cuts. Such knowledge ensures that if such cost cuts are unavoidable, that they can be confined to activities which will do the least damage to the production of sustainable revenue.
While a recession is generally a period of reduced demand, revenue and profit, it can also be a time of opportunity and creativity. For the CMO, recession requires a constant monitoring of marketing productivity to maximize the efficient use of assets. At the same time, austerity can be the mother of invention. Do market conditions dictate a change in how the market is accessed and satisfied? Would a review of marketing processes reveal alternative methods that could prove more efficient and cost effective? Is there a change in customer demand that requires a new product?
The CMO’s job is to manage assets and investment efficiently to maximize sustainable profitable revenue. While successful CMOs need not themselves be creative, they need to foster and maintain a creative atmosphere within their marketing specialists especially during time of austerity and recession.
Successful management of marketing requires good leadership, especially in difficult trading conditions. Even successful marketing teams can become demoralized and less effective if their morale and motivation is not maintained. In the worst case good and experience marketers may leave. The CMO can only be successful in the mission of delivering sustainable profitable revenue with the aid of a successful marketing team. CMOs must rely and encourage the creativity of other professional marketers, because they are the prime asset of the marketing function. If, because of the size of the business or the size of the marketing team or the particular challenge of the market, that pool of creativity is deemed to be insufficient, then the CMO should seek additional creative input via consultants, specialist outsourced agencies, or qualified interim staff.
When it comes to difficult economic times, the CMO’s prime responsibility is to maintain the levels of profitable revenue. To do this, the CMO must maintain the assets of the marketing team in order to be able to take advantage of new opportunities as they arise and to justify the necessary expenditure and reinvestment required with quantified data of marketing performance.

© N. C. Watkis, Contract Marketing Service 28 Oct 08
Contract Marketing Service, (Marketing Performance Measurement Consultants)

If you know all the Marketing answers, why are you asking the question?

2008-09-26T15:15:00.000+01:00

Measuring marketing performance is essential if one is to analyse and define the current marketing situation and the results of marketing activities. But the measurement of marketing performance does not predict future results and neither does it indicate potential performance.
The responsibility for generating the profitable revenue for any business is that of the senior executive or CMO, in charge of all those activities which are directly or indirectly involved in anticipating and satisfying customer demand. But in assessing the performance of their marketing activities, every chief marketing officer (CMO) or marketing executive may at sometime develop a tendency to “tunnel vision,” restricting their ability to identify and appreciate new threats and opportunities.
When it comes to finding answers to marketing and business problems, there is rarely only one solution. The question is, not whether one marketing policy or action is the right one, but rather in the given circumstances, is it the best one? When managing marketing strategies, plans and actions, there is generally an advantage in submitting them to peers' review by a knowledgeable third party, to test the theories and principles. For many reasons, alternative views and ideas are often sought from outside the business from specialist consultants.
Outside consultants provide the advantages of coming to the problem without the baggage of “company history” and prejudice and being independent, they provide no risk in terms of company politics. Consultants provide a dispassionate answer with a different perspective as “the onlooker, who sees most of the game.”
It is often said of consultants that when asked the time, they borrow their client’s watch, tell the client the time and return the watch with an invoice for a fat fee. But if the consultant has told the client what the client already knew or could have found out for themselves the question is why did the client not act themselves?
When a professionally qualified consultant, properly briefed provides an answer to a problem, it should be based on their dispassionate analysis of facts coupled with their experience and expertise. How that answer is received by the client depends largely on why the client asked the question in the first place. Usually, the client is seeking confirmation for their own actions, or for alternative and new answers to their own.
From time to time consultants will make unsolicited approaches to businesses and CMOs. In most cases they will seek to present themselves and their business to demonstrate their capabilities and to invite enquiries. However, sometimes consultants will offer to demonstrate how they can be of potential benefit to a business, based on detailed research which may have identified some problems in which they specialize. For the CMO with an open mind to new ideas and results, the opportunity of a meeting to explore the ideas of informed consultants can prove very beneficial. Alternatively, the CMO who rejects such opportunities may be accused of having a closed mind to anything “Not invented here” and afraid of peer group scrutiny. The attitude of “we know all there is to know” by some chief executive officers and CMOs, is not helpful to the company as it tends to fossilize productive management thinking and practice. Such attitudes can damage the image of the business in the eyes of both customers and investors, as they can rarely remain hidden for long and soon become apparent in the public domain.
Assuming they have been selected for their competency and experience, consultants can make a major contribution to the success of the marketing organization by providing specialist expertise, independent analysis, and objectivity. Consultants do not claim to provide the perfect answer to every marketing or management problem, neither do they claim to be always right, but whether or not their answers are acceptable will largely depend on how well they were briefed, and the prevailing culture of the business.
Marketing performance should be measured by results. However, whatever advice, proposals or answers are given by consultants, the ultimate responsibility for marketing performance lies with the CMO, not the consultants, who remain useful contributors to marketing success but do not share executive responsibility.

© N.C.Watkis, Contract Marketing Service 26 Sep 08
Contract Marketing Service, (Marketing Performance Measurement Consultants)

Marketing Theory and Business Reality

2008-08-12T15:12:00.000+01:00

As many experienced managers of marketing and marketing practitioners will know, marketing theory and marketing practice are in reality, often not the same thing. While classical marketing theory might define the ideal marketing organization, the fact is that most marketers usually find themselves in an organizational structure that is already existent. As the marketing organization is part of a larger business structure, marketers are not usually in a position to change or develop it in any major way. Thus in practice, the role of the marketing function may not directly relate to the text book theory. In reality, marketers have to deal with things as they are and not as they might prefer them to be.

The Chartered Institute of Marketing defines marketing as being: “the management function that anticipates and satisfies customer demand profitably.” Thus in satisfying customer demand, the definition includes sales and other activities as part of the marketing function. While some may question this definition, it is still the definition which is more widely quoted in text books and academia internationally than probably any other. That said, while the definition of marketing is inclusive of many specialist activities, those specialist activities are often separately organized within the corporate environment, rather than collectively under a unified marketing management. In practice, the way that marketing activities are organized is often dependant on the size of the business organization.

In the smaller business, all the activities involved in the marketing function are done by only a few people, of whom the largest proportion may well be from the sales force. Quite often the person in charge of this organization will be known as the “sales and marketing director or manager”, emphasising that frequently marketing and sales are still seen as separate organizations and activities.
In companies that have a “Sales and Marketing manager,” these activities are at least united under one decision maker, thus providing unified management. In smaller business organizations, the relatively small number of staff employed requires a greater integration of marketing related activities that generally reflects the classical definition of marketing. This enforced integration of activities requires marketers to develop their skills across all the elements of marketing to generate and maximize profitable revenue. However for marketer involved in larger organizations this is frequently not the case.

In many large companies the various activities of marketing are often separated within the corporate organization. Sales may be separated from marketing, as may be research and advertising, with each area having separate structure but without necessarily a collective management. With large established businesses, such situations tend to have arisen out of a hierarchical structure of the organization, rather than an organization that reflected the business operational requirements. One only has to look at the organizational tree of many large companies to see the scope for “empire building” and the development of a “Silo” mentality, where individuals concentrate solely on their own responsibilities and results, without concern or interest for other areas of the business.

The performance of a marketing organization should be measured in sustainable profitable revenue. However, the sustainability of future revenue is dependent on continuing customer satisfaction with the price, product and service combination. Customer satisfaction can only be judged from surveys to ascertain the level of satisfaction and the customer’s perception of the product, company and service. Such surveys may indicate problems which, although they are not the responsibility of the established marketing organization, may have adverse effects on the overall marketing performance. Such perceptions might result from customer service support, deliveries, credit control and other areas. For the marketer and especially the Chief Marketing Officer (CMO), this means that while they have defined areas of responsibilities, they need to be aware of the performance of many other business areas whose performance will directly and indirectly effect the maintenance of customer satisfaction and sustainable profitable revenue.

According to the Deloitte report, “Marketing in 3D”,(Jan 2008), professional marketers rarely reach the boardroom to provide their professional influence. In fact, the report showed that of those that reach CMO status, few remain in post longer than 22 months. The report also showed that many marketers appeared confused about their role and contribution to their business, and this feeling was compounded when activities which should normally be part of the marketing function, such as customer service, telesales, distribution and product development were controlled by other departments.

Ideally the CMO should be responsible for all activities that are directly and indirectly involved with “anticipating and satisfying customers”, but the reality is that this is frequently not the case. What should the CMO and professional marketer do under such circumstances? Although the CMO or professional marketer may not have executive authority over all the business activities that comprise classical marketing, they should think and act as if they did, within the limits of their corporate authority. To do this they can:

* Identify all those business areas which maybe outside the existing marketing organization that impinge on customer satisfaction. E.g. distribution, production, product development, customer service etc.

* Obtain all the statistical performance reporting data provided by each relevant business area. If suitable data should not be available, define which performance measures are desirable and relevant and request them from the relevant business areas.

* Relate all the relevant performance data to the marketing organization’s performance data in order to obtain a full picture of the overall ability to anticipate and satisfy customer demand.

* Undertake regular customer satisfaction surveys to indicate how and where performance needs to be improved.

Although a CMO may not have executive responsibility for all the business operations involved in anticipating and satisfying customer demand, he or she should cultivate an executive interest in them. By so doing they will be able advise and report to the board on all marketing related activities, demonstrating the importance of the integrated management approach to all those activities involved in generating sustainable profitable revenue.

© N.C. Watkis, Contract Marketing Service 12 Aug. 08
Contract Marketing Service, (Marketing Performance Measurement Consultants)

Credit Squeeze on Marketing Management

2008-07-15T15:10:00.000+01:00

There is little doubt that the western economy has entered the downward trend of the economic cycle. Whether the economy goes into recession or simply remains in an indeterminate period of very low growth cannot be known. What is certain is that the change in the economic climate will affect all those involved in marketing. How marketers react to these changed conditions will be important both to the individuals concerned and to their companies.

As the economy slows down, especially resulting from the “Credit Squeeze,” so customer demand is likely to fall, affecting the ability to achieve revenue targets. At the same time, the increase in the cost of overheads in the form of power, fuel and commodities, is reducing profits. The result of these effects means that businesses start to look for economies in their budgets and to reducing costs wherever possible. Unfortunately, in many businesses, one of the first areas to come under scrutiny with a view to cost reduction is that of marketing.

When revenue and profits are threatened, chief executive officers (CEOs) and chief financial officers (CFOs) will naturally consider all the various budgets to seek ways of reducing costs and unnecessary expenditure. Unfortunately, many see the marketing budget as an easy target, and an opportunity to make savings. However this attitude in generally born out of ignorance of the purpose of marketing, and it is up to marketers themselves to dispel myths and to demonstrate their essential contribution to the business as a whole.

Regardless of the various interpretations of the term “marketing”, the sole purpose of marketing is to produce sustainable profitable revenue by anticipating and satisfying customer demand. Therefore all those various activities involved marketing are collectively essential in the production of revenue and the long term sustainability of a business.

What should the chief marketing officer (CMO) do in this situation? Ideally, the CMO should act pro-actively rather than reactively to a situation. The effective management of the marketing function requires a continuous awareness of the market and economic environment, as well as the comparison of actual performance with the current marketing plan. The CMO is tasked with maximizing sustainable profitable revenue, while minimizing the costs and the use of assets. If the CMO is managing the marketing function effectively, then they need to be continually aware of the overall marketing contribution, as well as the efficiency of the use of assets and investment required to produce the revenue.

Marketers need to have a clear understanding of the budgets for which they are responsible.
A detailed knowledge of all the elements of the marketing budget is essential, because the effectiveness of the marketing function must be measured over the whole organization. The elements of the marketing budget may not always be measured effectively in terms of their individual contribution, but when measured collectively have a significant effect on continuous business development.

Because the effects of advertising campaigns are generally difficult to quantify, the advertising budget is one which is frequently targeted for economies. Knowing the size of the advertising budget and the amount spent is not sufficient. All costs and investments should normally be broken down into detail, because it is only then that the value of investment can be seen.

However, if marketers wish to avoid cuts to their advertising and promotional spend, they will have to refine their programmes so that there are measurable results. Using response advertising is one way of providing positive evidence of performance to justify advertising investment.

Actions that the CMO or marketer should undertake:

* Be pro-active rather than reactive in reporting the performance and efficiency of the marketing function.
* Ensure that the achievement in relation to the current marketing plan is analysed and reported,
* Ensure that if the marketing results are “off track”
o Analysis is undertaken to understand the reasons
o Reasons for over performance as well as under performance are understood.
o Prompt remedial action is taken when necessary.
* Be prepared to move to a contingency plan if the situation requires it.
* Understand the extent and detail of what is actually included in the marketing budget, i.e. all those elements involved in generating revenue by satisfying customer demand, some of which may lie outside the official marketing budget.
* Continually analyse and assess the value of all marketing expenditure in terms of its contribution individually of collectively to the generation of sustainable revenue.
* Use quantifiable analysis wherever possible and avoid qualitative data.

Marketers need to explain to CEOs and CFOs exactly what the marketing function does and what it produces. To do that, marketers have to provide measurements of marketing performance in terms of the financial contribution that all the business getting activities that comprise “marketing”, make to the business, as well as the investment and costs involved. These are numbers which will relate to other costs and investments in the business and so helps the CFO and the CEO to have a full and accurate picture of the overall business performance.

The challenge for marketers is to present marketing performance measurements to the CEO and the management team in financial terms that they understand, such as contribution and Return on Investment (ROI).

By defining marketing performance in a manner that relates to the generation of profitable revenue, “marketing” will be seen and valued by the CEO, CFO and senior management, as the generator of profitable revenue on which the company depends, and not as purely as a number of costly individual activities of indeterminate worth which can easily be cut. Being able to analyse and quantify the marketing performance can also provide reasons and direction for increased investment, even in a period of lower demand and economic slowdown.

© N.C.Watkis, Contract Marketing Service 15 Jul 08
Contract Marketing Service, (Marketing Performance Measurement Consultants)

Is Marketing the Problem?

2008-06-03T14:54:00.000+01:00

When asked, most small and medium sized companies will say that they are anxious to improve their marketing. If asked to explain further, most businesses will say what they really require are more leads and more sales. Occasionally some businesses will say that they seek more cost effective advertising. This indicates for that for the smaller business, marketing is simply another name for sales and advertising.

It is also clear that in small and medium sized businesses, marketing involves all the activities that get and retain business, and are inextricably involved in obtaining the necessary revenue. Measuring marketing performance in small and medium sized businesses is relatively easy, because marketing is generally regarded as consisting of sales and advertising.

However in many large companies, marketing is increasingly seen in a different way.
Most American companies and many in Britain see sales and marketing as two separate parts of a business, which they reflect in the structure of their organizations.

The concept of marketing has developed considerably since the Chartered Institute of Marketing (CIM) produced its definition of marketing as being “all those activities which anticipate customer demand profitably.” The CIM did much to promote the concept of marketing to the business world and the general public, so much so, that the term “marketing” is used by the general public as part of everyday speech.

This is a far cry from the 1970’s when the Institute of Marketing, as the CIM was then called, sought through its definition, to widen the recognition of the word in order to develop marketing as a separate professional business discipline. The efforts of the CIM were a great success and the word “marketing” has become increasingly recognised in both the business and wider world, although it is probably no better understood.

Marketing became fashionable in the 1980’s especially with all the publicity given to the Department of Trade and Industry (DTI) and CIM’s very successful “Marketing Initiative” programme, for small and medium sized businesses.

As the marketing became fashionable so other terms such as sales and advertising fell out of fashion and were restyled as being “marketing.” As a result, the term marketing started to become debased and used so its meaning increasingly did not relate to the CIM’s 1976 definition.

Even the CIM’s own professional marketers are starting to talk about the “marketing” of products and services, when they are really referring to selling, advertising or promotion. Over time the word marketing has lost its precise meaning, so that now the CIM is considering changing its definition to meet the many and various interpretations of the word.

In any business, there are a number of activities which are there to anticipate and satisfy customer demand. The purpose of satisfying customer demand is to produce revenue from which the business makes the necessary profit for the benefit of its shareholders, its workforce, and the customers, who rely on the continuance of the business in order to satisfy their current and future needs.

There are many separate disciplines which are collectively used in the Marketing Function. These separate disciplines have their own descriptive names such as Advertising, Selling, promotion, public relations (PR), customer relationship management(CRM), Search Engine Optimization (SEO) marketing research, strategic business planning.

Professional marketers may be involved in all these disciplines. However, unless these disciplines are used collectively to produce revenue for the business, they should not be called “marketing,” although individually they are specialist marketing disciplines. Thus while specialist marketing disciplines are effectively used by non profit making organizations, especially for communication through advertising, PR, and customer relationships, they are not involved with the production of revenue.

Text books all over the world use the CIM’s 1976 definition of Marketing. To radically change it would probably do more harm than good to the image of the CIM and its members.

If people do not understand the definition of “marketing,” then they will not understand the value of professional marketers. If marketers insist on continually changing the meaning of words to describe the work they do, they will be rightly accused of seeking to create a false mystique, which will be harmful to their professional future.

There are a number of things that Marketers should do to improve their image and demonstrate their contribution to their respective businesses:

* Use plain English in describing their work and results; avoid acronyms, jargon, “business speak” and cliché.
* Confine the use of the word “marketing” to the context of the CIM 1976 definition.
* Specialists in CRM, advertising, PR, Search Engine Optimization or any of the specialist areas should use these specialist descriptive terms for what they do, rather than use the term “marketing.”
* Marketers must seek to measure their performance and contribution to their respective employers in quantifiable terms; qualitative analysis and justification carries little respect at boardroom level.

Like it or not, marketers must realize that Chief Executive Officers (CEO) believe that the generation of revenue is the responsibility of what they have come to understand as the “marketing” function. If marketers do not see that generating revenue is their prime responsibility, then CEOs will soon find others who may not be professional marketers, to do the job in their stead.

© N.C.Watkis, Contract Marketing Service 03 Jun 08
Contract Marketing Service, (Specialists in Marketing Performance Measurement)

Benchmarking, Balanced Scorecard and Marketing Performance

2008-06-02T14:56:00.000+01:00

When companies announce their annual results, there always seems to be criticism by the media and politicians about the level of profits. It does not seem to matter whether it is British Airways, BAE, Tesco, the Banks or indeed any company. It would seem that profit is only acceptable provided that the level is discrete. Yet those politicians and journalists who criticize large profits seem to forget that the purpose of any business is the generation of profit and profit only. The current vogue that seems to suggest that businesses have social and community responsibility, “green Agenda”, charitable aid and tax liability, tend to ignore the fact that these aspects rely entirely on the ability of a business to make sustainable profits.

To make sustainable profits for the continuance of any business requires the executives to successfully balance and maintain the satisfaction of the very different requirements of the customers, employees and shareholders. Customers, employees and shareholders are equally important, because the business cannot continue without the continuous satisfaction and co-operation of all three. While the principles of business remain the same, as businesses grow so the successful management of large organizations becomes more complex.

As managers have sought to improve the overall management of increasingly large and complex organization, there has been an increasing demand for management systems that hopefully would improve business efficiency and effectiveness. Two principle systems in recent years have been that of “Benchmarking” and “Balanced Scorecard”.

“Benchmarking is defined by David Kearns, Chief Executive of Xerox Corporation as being “the continuous process of measuring products, services and practices against the toughest competitors or those companies recognized as industry leaders”. The objective of using Benchmarking is to ensure that the best of proven practices are incorporated into an organization’s procedures. The definition covers all possible business endeavours whether a product, service, or support process.

While “Benchmarking” requires the search for those industry best practices that lead to superior performance, its perceived value is as a continuous process of measuring against the best. However, it is only by the change of its current practices and business processes that a business will achieve overall effectiveness through Benchmarking. But to be effective, such change requires effective leadership and decision making.

Benchmarking is potentially useful but not foolproof. To assume that successful companies use the best and most successful practices is dangerous. What are the best practices and how do you know? Every company is different, even in the same industry and market. They all work slightly differently, having different cultures and business drivers. The principle danger with benchmarking, is that while it is interesting to note methods and processes that appear to work in “successful “ businesses, slavish copying of such methods does not guarantee similar success and may be counter productive.

The Balanced Score Card is a strategic planning and management system that is used extensively in business, industry, government as well as non profit organizations worldwide to align business activities to the vision and strategy of the organization. Designed to improve internal and external communications, and monitor organization performance against strategic goals, it was originated by Drs Robert Kaplan and David Norton of the Harvard Business School.

The first requirement of the Balanced Score Card (BSC), as described by Kaplan and Norton is for a company to define its “Vision and Strategy”. Having defined Vision and Strategy, the BSC suggest that the business is viewed from four perspectives namely: Finance, Customer, Learn and Growth and Internal Processes, and that the collection and analysis of data as well as the development of metrics, should be relative to these perspectives.

In the Kaplan and Norton model of BSC, in order to answer the questions specific to each perspective, the perspectives are all viewed in terms of objectives, measurements, targets and initiatives. For the Customer perspective, the specific question is, “how should we appear to customers to achieve the corporate “Vision?” For the Financial perspective, the question is, “how to appear to shareholders to succeed financially?” For Learning and Growth, “How to sustain change and improvement to achieve Vision and Strategy?”. The key question For Internal Processes, is“What Business processes must be excelled at to satisfying customers and share-holders?”

At the centre of BSC is the corporate Vision and Strategy. For many businesses this is the opportunity to define the company position in terms of social commitment, environmental responsibilities and general good works. However, not many Vision and Strategy statements mention, that the purpose of a commercial organization is to develop a self sustaining profitable business, which is essential for a company’s future.

Regardless of the Vision statement, the objective of those in charge of getting and retaining business is to maximize sustainable profitable revenue. Applying this to the four perspectives requires the Chief Marketing Officer (CMO) to be involved with at least 3 of the 4 perspectives. CMOs will be involved with the Customer perspective primarily through the Customer Relationship Management (CRM) system. The Finance perspective requires inputs from the CMO in terms of budgets, investments and return, while Internal Business processes area requires the CMO’s inputs from management systems of control and measurement. The ability of the CMO to identify and interpret results and trends will determine the input into the Learning and Growth perspectives.

To use BSC and Benchmarking effectively, requires the CMO to be able to measure and quantify performance across all the marketing based activities involved in getting and retaining business.
Chief Executives Officers (CEO) need to know how much profitable revenue their business makes, whether it is sustainable, where it comes from and what it costs to get it, as well as considering their overall level of gross and net profit. In assessing how the company performance rates against competitors, the CEO will rely on the CMO to provide the best data to use in the Balanced Score Card and for comparison in Benchmarking.

The key to the success of using BSC and Benchmarking, is to use the systems as a guide to help the CMO achieve the objective of maximizing sustainable profitable revenue. Measuring marketing performance is essential for the effective management of all the various business getting and retaining activities. The danger for many businesses is, that in seeking to comply with the requirements of BSC and Benchmarking, they loose sight of their true purpose as a management tools to maintain a self sustaining profitable business, and see compliance as an objective in itself.

© N.C.Watkis, Contract Marketing Service 02 Jun 08
Contract Marketing Service, (Specialists in Measuring Marketing Management Performance)

Twelve Performance Indicators that Marketers should measure.

2008-04-06T14:53:00.000+01:00

Marketers are constantly changing the definition of marketing. However, the definition of marketing by the Chartered Institute of Marketing(CIM), has yet to be bettered. The CIM defines marketing as “the management process that anticipates and satisfies customer demand profitably,” thus encompassing the generation of profit with customer satisfaction. By this definition, it is clear that the purpose of “marketing” in any business, is the generation of profitable revenue. It therefore follows by this definition, that the sales function is the executive arm of marketing, and therefore should be managed as a single business area.

However, in many businesses, sales and marketing are regarded as separate business functions and managed accordingly. While this arrangement may be regarded as illogical in the light of the CIM’s definition, it is a fact of life with which many marketers have to accept. In addition, the division of sales from marketing in a business organization often brings political pressures which are counter productive, especially when vying for budgets and justifying expenditure.

When faced with demands to justify the money invested and to quantify the return on investment, marketers must not try to hide under the premise that marketing is an art not a science, and suggest that its performance cannot be meaningfully measured. Where marketing is a separate organization from sales, it is for marketers to demonstrate to senior management not only the importance of their activity in the support of sales, but also the need for the sales and marketing function to be closely aligned and ideally under a single management structure.

The marketer’s role in this situation is to provide direction and support for the selling function, by developing and monitoring marketing plans to support the marketing objectives of the corporate business plan. To achieve this, marketers must demonstrate their supporting role for the sales function by identifying market opportunities and potential target customers as well as providing assistance in gaining and retaining customers. Marketers should also be responsible for measuring actual sales and revenue performance against the planned objectives of marketing plan as well as monitoring the use marketing resources to support the sales organization

Targeting sales through analysis of markets and demand is a responsibility of marketing. It is also the marketer’s responsibility to support the sales organization by market preparation through advertising and promotion, and maintaining a company and product awareness by the market through advertising, promotion, public relations, and the use of customer relationship management. Marketers have also a prime responsibility for developing effective pricing strategies that produce sustainable profitable revenue.

The work done by marketers is directly and indirectly fundamental to the success of the sales function.
When it comes to verifying their contribution to the business and justifying the investment in marketing, marketers must look at their contribution to the whole of the business getting and retaining activities and not consider themselves to be a separate business function from sales. Reporting on business performance must therefore be across the whole of “sales and marketing”. The only measurements which have true value are those which are quantifiable which are usually of inputs and output; such as costs, investments and revenue. In order to achieve these marketers need to list all the activities that provide direct and indirect support to sales and customer satisfaction as well as quantify separately all the costs involved in providing both direct and indirect support

Marketers must provide a detailed analysis of the contribution that “sales and marketing” make to the gaining and retaining of business. This should include an analysis of all sales made by: product, customer group, customer market, market sector, market segment, geographical area. In addition it should identify the source of sales including web produced, direct sales, agents, etc.

The Cost of sales must be carefully analysed. This analysis should include all costs relating to product, customer group, customer market, market sector, market segment, geographical area. It should identify the cost of sales by direct sales, agents, and web page.

Marketers should report on the general performance of business getting activities in terms of:

* Orders: number, average value, total value
* Enquiry/quotation conversion rate
* Quotation/order conversion rate
* Analysis of lost orders
* Order/delivery time
* Invoice to payment time
* Total marketing cost per order
* Operating Profit
* Net Profit/unit sale
* Debtors/sales
* Stock Turn
* Growth in Customers

Where marketers do not have senior executive responsibility for generating revenue, they must be the providers of all the quantified “sales and marketing” information on a continuous and regular basis to the senior decision makers. Reporting data for the sake of it is counter productive and wasteful. Always the marketer must ask “What do we need to know? Who needs to know? For what purpose is the information required and in what form will it be needed?” Marketers must ensure that those decision makers have suitable performance indicators in order to prompt the necessary questions that enable informed decisions to be made.

© N.C.Watkis, Contract Marketing Service 06 Apr 08
Contract Marketing Service, (Specialists in Marketing Performance Measurement)

How can marketers gain influence in the boardroom?

2008-03-07T14:51:00.000Z

In January, “Marketing” magazine published an article entitled “Marketers Lack Influence in the Boardroom”. The article was based on the findings of a Deloitte report on the attitude of organizations to “marketing”, entitled “Marketing in 3D”. This report, which is available on line, was based on 217 in depth interviews in five European countries, and gives a picture of “marketing”, and attitudes of businesses towards it. The results were not dissimilar to other reports that have been published over the past five years or more.

A survey in 2005 by the Chartered Institute of Marketing, revealed that just 11 of the United Kingdoms FTSE 100 companies had a marketer on the main board. In the majority of businesses, the management board consists of a Chief Executive Officer (CEO), a Chief Financial Officer (CFO), Chief Production Officer (CPO) or equivalent, Senior Personnel Officer, and Sales Director.

While the term “marketing” is generally defined as “comprising all those activities involved in anticipating and satisfying customer demand profitably,” most management boards generally do not appear to understand the term, and consider it synonymous with advertising and promotion. However, the term “sales” is easily understood by senior executives, having quantifiable results in terms of revenue and volume. In some businesses, the sales director will be titled Sales and Marketing, indicating that their responsibilities are wider than purely Sales, covering other disciplines such as advertising and customer relationship management (CRM).

The purpose of the marketing function of any business is to generate sustainable profitable revenue by anticipating and satisfying customer demand. Thus the effective management of the marketing function is fundamental to the success of every business.
Considering that generating revenue is the prime function of any business, it is surprising that probably the majority of businesses would be hard pressed to say what return they get for all the money invested in getting and retaining business. In fact, many businesses would find it difficult to actually quantify how much they spend or invest in getting and retaining business.

Why are there not more designated marketers at board level? The answer probably lies with marketers themselves. Many are confused about their role, having limited objectives, being highly specialized in specific disciplines and serving on average only 22 months in post before moving elsewhere. In addition, what is evident from these reports is that marketers, especially in large organisations, are seen as increasingly specialised, separated from their colleagues and operation in what have been called “functional Silos”

While the sales function must be managed by a competent sales manager, all the specialist support functions of marketing, such as CRM, advertising and promotion, marketing research, product development, product and brand management also require specialist management. CEOs and CFOs need to understand that although the marketing function comprises many specialist activities they need to be managed collectively as a single business area. This is because they are mutually supporting specializations that collectively generate the necessary revenue for the business. However if revenue generation is to be managed effectively it requires an overall manager of director status, who would be the “Director of Marketing” and to whom all the specialist discipline managers would report.

Because of the difficulty that many people currently have, in achieving an accepted consensus view on the definition of marketing and its responsibilities, perhaps an alternative term should be used at board level. This term could be known as “Business Operations”. As such “Business Operations” would be responsible for anticipating, finding, getting, retaining and satisfying customer demand profitably. A director of “Business Operations” would therefore be responsible for generating the sustainable profitable revenue for the business, and to do it as efficiently as possible, with the minimum of costs and use of assets.

The effective director of “Business Operations” need not necessarily be a professional marketer, but will have to be a good staff manager, capable of managing talented but often narrowly focused, specialist marketers into an effective team, to generate sustainable profitable revenue for the long term.

If marketers seek to have influence in the boardroom, they must learn to speak about profit, revenue and costs, which is the language of senior management and directors. Business is about profit and profit is about revenue and costs, not brand and image.

Marketers must be able to quantify and demonstrate the contribution of the marketing function as a whole to the business, both for the immediate and the long term, and not confine themselves to their own particular specializations. Should they seek to be in senior level appointments or aspire to be directors of “Business Development”, then marketers will have to prove themselves be good leaders, managers and motivators, able to think strategically for the long term development of the business. If marketers confine themselves to the language of brand, image, and CRM they are unlikely to qualify themselves for higher management.

© N.C.Watkis, Contract Marketing Service 07 Mar 08
Contract Marketing Service, (Specialists in Measuring Marketing Performance and Return on Marketing Investment.)

What makes Effective Management of Marketing?

2008-02-06T14:50:00.000Z

The marketing press is full of talk about Return On Investment (ROI), but frequently does not define what it means, or describe what is required to actually achieve it. Brands and their importance are another area of major discussion in marketing circles. Yet while brands may be important, little seems to be published about but how the brand consciousness of the consumer is converted to sustainable profitable revenue. Customers may all recognize the brand, know what it is and where it is, but do customers want to have and pay for it? While brands and image may be important in consumer related business, brand and image has far less importance in the business to business sector, where concerns of service, reliability and cost effectiveness tend to predominate over band and image.

Advertising, promotion, customer relationship management (CRM), are all important but what is their contribution to profitable revenue? Selling is the executive arm of marketing and arguably its most important aspect, as it is the main interface with the customer and is directly responsible for generating the revenue on which the business depends. All marketing activities are inter-dependant and collectively contribute to support sales success.

Marketers appear to concentrate on advertising, promotion, market research, and CRM, but tend to ignore selling, despite its importance, perhaps because it is generally considered that few marketers have practical experience in selling. Yet selling is the only marketing process that actually brings in revenue, whether that process is via a sales force, web-site, or direct response advertising. A recent report, “Global Sales Perceptions”, by consultants DDL Business Leadership, rated British sales staff no better than poor or fair. The report of DDL suggests that sales people are generally under valued, and under trained, yet selling is fundamental to success of every business.

In most walks of life, the only way to assess success is to compare objectives with achievements. This is particularly true in business. Business is about making profit. As the late Robert Townsend said, “If you’re not in business for fun or profit, what the hell are you doing here?” Profit is what is left when all the costs and investments involved in running a business have been subtracted from all the revenue generated by the business activity. Profit rewards the investors and provides for reinvestment to develop and sustain the business.

Marketers who are good at their own speciality, advertising, promotion, CRM, or marketing research do not necessarily make good managers of marketing.
In recent years marketers have tended to concentrate on the customer to the exclusion of everything else. Customer satisfaction is vitally important, but sustainable profitable revenue is the prime requirement of every business, and customer satisfaction is merely the means of obtaining it. Generating profitable revenue is the responsibility of the marketing function and the marketing manager. Without sustainable, profitable revenue, there is no profit, and without profit there is no business.

The job of the of the marketing manager is to balance all the marketing activities to support and maximize the generation of sustainable profitable revenue, while at the same time, minimizing the costs incurred and the use of assets involved in its production.
Many factors are required for effective marketing management. The marketer, who aspires to successful marketing management, must be able to inspire specialist marketers to develop innovative and creative ideas that collectively contribute to marketing objectives. In addition, they must be able to identify and understand causes and effects of marketing situations and to question all aspects and assumptions relating to markets and marketing. Effective marketing managers must develop structured plans with quantified objectives, make clear decisions to direct staff and allocate resources and implement effective actions.

For the marketer who aspires to senior management and a board level position, profit must no longer be the unspoken word. The aspirant marketing manager must view all the business getting and retaining activities as contributing to the generation of sustainable profitable revenue. Previous experience and specialization must not be allowed to bias necessary objectivity or decision making.

Business organizations may be considered in two parts; Business Operations and Business Support. The area of Business Operations, consists of the “business doing” functions, (Production or service provision) and the “business development” function, (marketing). The area of Business Support, provides the necessary resources for the Business Operations area, mainly finance and personnel.

Marketers must think beyond the confines of textbook definitions and see marketing as integral to the “Business Operations” that produce sustainable revenue, by satisfying customers. “Business Operations” must therefore include all the traditional marketing activities, but also those of production or service provision, as well as research and development.

When evaluating the contribution of the marketing function, its performance must be measured in terms of output and efficiency. From the business point of view, the main factors will be the amount of sustainable profitable revenue produced together with a measure of its efficiency in converting marketing costs and investment into revenue.

Effective marketing managers must be able to inspire, motivate and manage their marketing staff to achieve the required objectives, as the success or failure of the marketing function is dependent on the ability of its staff. At the same time, they must manage resources to minimize costs and maximize the production of sustainable profitable revenue, measuring performance to justify their actions and demonstrate their contribution to the business.

© N.C.Watkis, Contract Marketing Service 06 Feb 08
Contract Marketing Service, (Specialists in Measuring Marketing Performance and Return on Marketing Investment.)

What’s the purpose of Marketing?

2008-01-02T14:49:00.000Z

The November edition of the Chartered Institute of Marketing (CIM)’s magazine The Marketer, dedicated five pages to a single article entitled “What’s the role of Marketing? “

The article was extensive, but concentrated on the definitions of marketing ranging from the CIM’s own 1976 definition, to alternatives suggested by academics, consultants and practitioners. Strangely, the article completely ignored and never dealt with the fundamental purpose of marketing.

Philp Kotler defined Marketing as “the social process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others.”

Peter Drucker gave a broader definition, - “Marketing is not only much broader than selling, it is not a specialized activity at all It encompasses the entire business. It is the whole business seen from the point of view of the final result, that is, from the customer's point of view. Concern and responsibility for marketing must therefore permeate all areas of the enterprise. “
In October 2007, the American Marketing Association Board of Directors adopted a new definition of marketing, as “the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.”
These three definitions epitomize a lot of current thinking on marketing, concentrating on customers and “added value”. What is meant by “added value” is often never explained, and despite all the customer centric descriptions of marketing, its overlaying purpose seems to be forgotten.

The purpose of marketing in any organization or business is to produce sustainable profitable revenue and nothing else. For many, marketing is still seen as an art not a science where marketing performance cannot be measured in any meaningful way. While this view is demonstrably wrong, the view still persists. Marketing performance is measured by results and those results must include the measurable contribution of the marketing effort to the business objectives and the production of sustainable profitable revenue. The marketing organization generates sustainable revenue by anticipating and satisfying customer demand profitably. This is best summed up in the CIM’s 1976 definition of Marketing as “the management process that identifies, anticipates and satisfies customer requirements profitably”.

The CIM article shows that many marketers are still fixated on trying to define what they do and hopefully, some way of measuring it to justify the business expenditure.

In any business, the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) are primarily interested in only two things, the generation of sustainable profitable revenue and the necessary investment required to obtain it. The CEO’s task is to maximize sustainable profits, while minimizing the use of assets and investment, while the CFO’s task is to manage the financial resources to support the objectives of the corporate business plan.

The prime objective of the Chief Marketing Officer (CMO), is to maximize sustainable profitable revenue, while minimizing the use of marketing costs and investment. The CMO has the responsibility for achieving the corporate marketing objectives within the budget. Provided that the CMO achieves or exceeds the objectives within the budget, the way that the marketing function is conducted need not be questioned. Only if the targets are not reached, or the budget is exceeded, will actions and investment need to be justified with quantified data by the CMO,

The overall responsibility of converting profitable revenue into profit is the responsibility of the CEO and CFO, but not of the CMO. However it is the responsibility of the CMO to ensure that the profitable revenue is sustainable for the continuation of the business, and this can only be done by anticipating and satisfying customer demand.

Any business organization consists of three elements, customers, shareholders and staff. If the business is to be successful, then the satisfaction of all three elements must be kept in balance, so that no element has priority over another. Shareholders want a share of the profit in return for their investment. Staff must be rewarded, for without them no profits can be made. Customers must be satisfied or there will be no revenue for profit. If there is no profit there is no business, which fails the shareholders who lose their investment, fails the staff who lose their jobs and ultimately fails the customer, who loses the source of product or service.

The emphasis of marketing needs to be changed. Customer satisfaction is not the purpose of marketing. The purpose of marketing must be the generation of profitable revenue, by the satisfaction of customers.

“Not for profit” businesses tend to think that the current definitions of marketing do not fit their organizations. However, a “not for profit” business cannot exist without being profitable, if only to allow for the necessary investment and development, without which any business will die. Similarly, the marketing functions in Government departments do not generate their revenue, which is provided by the taxpayer. But the marketing organizations should ensure that the taxpayer gets value for money and it is therefore responsible for ensuring customer satisfaction through effective quality control of the service to demonstrate and justify the return on the taxpayer’s investment.

Marketing actions do not take place in a vacuum. Satisfying customers does not in itself make a profit. Customers can easily be satisfied by providing free goods and services, but without profitable revenue there will soon be no business. The generation of profitable revenue is the purpose of marketing and for that reason any definition of marketing that ignores profit is incomplete, for it ignores the purpose of the action.

Some may regard it as heresy to say it, but Kotler, Drucker and others in their definitions of marketing, got the emphasis wrong. The CIM’s current definition contains all the necessary elements that define the marketing function, but the emphasis should be changed to include the purpose of marketing within the business organization.

“Marketing” encompasses all those activities which generate sustainable profitable revenue by anticipating and satisfying customer demand.

© N.C.Watkis, Contract Marketing Service 02 Jan 08
Contract Marketing Service, (Specialists in Measuring Marketing Performance and Return on Marketing Investment.)

how good is your marketing organization?

2007-10-17T14:46:00.000+01:00

How good is your marketing organization? Does it deliver what is expected of it? Is what is expected clearly understood throughout the business?

Marketing is the term that collectively describes all those functions that anticipate and satisfy customer demand profitably. As described, marketing is fundamental to any business as it is responsible for the generation of revenue necessary for a business’s survival and future. Because of its importance in the generation of revenue, marketing needs to be demonstrably efficient and effective. But how does one define what is efficient and effective?

Of all the various business functions,- finance, production, personnel, - that of marketing is often the least clear in terms of its responsibilities. Although marketing departments appear to have distinct specialist areas such as sales, advertising and promotion, research, and customer relationship management, in practice this is often not the case, as job descriptions can be broad and ill defined.
Company departments often have no clear definition of purpose, with uncertain objectives and standards of performance. Marketing departments are no exception. Although ostensibly defined by name, marketing departments rarely have their purpose and objectives clearly stated. Without a clear definition of purpose, seeking relevant measurements of performance is unlikely to be helpful in effective management. Performance can only be judged against defined objectives.

Before seeking to measure anything, it is essential to define the mission and objectives of the marketing department and it separate disciplines. In any business, the main objective of the Chief Marketing Officer (CMO) is the maximization of sustainable profitable revenue, with the minimization of costs and assets used. The overall objectives of the marketing department should be set out in the corporate business plan, principally in the form of the revenue objectives. To achieve the corporate financial objectives, the marketing organization needs to produce a marketing plan that defines the required marketing objectives, and details the strategies, actions and resources, to be used to achieve them.

Because marketing is responsible for generating the sales revenue, it is also responsible for developing and maintaining all the activities which support customers and assist selling. The marketing function therefore undertakes a wide variety of activities not all of which are directly related to customers and sales. Organizing the marketing function is the responsibility of the CMO. When assessing the efficiency and effectiveness of marketing, questions should be asked about the marketing function as a whole. What are its objectives? What are its resources? How well is it managed? How does the marketing organization relate to the strategic business plan?
The efficiency and effectiveness of a marketing organization, depends largely on what that organization is meant to do. Therefore, its purpose needs to be stated in a mission statement that can be clearly understood throughout the business, especially by senior management and the CMO,

Periodically, the CMO needs to review all the various tasks ascribed to marketing and to consider whether they fit the marketing mission, and how they contribute to the business objectives. Tasks can be separated into routine and non-routine groups. Routine tasks are those that are regularly required and directly relate to the business objectives. Non-routine tasks are those other occasional tasks, such as corporate team building events, which may have importance but do not relate directly with the defined marketing objectives.

All tasks should be assessed according to how they assist in either generating revenue, or reducing costs and the use of assets. Tasks can be prioritized in terms of their relevance to the marketing objectives. Activities, which do not directly contribute to the objectives, need to be evaluated on the basis of the opportunity costs incurred of devoting time and resources to them.

When reviewing all the tasks required of the marketing function, consideration needs to be given to the range of resources available, in terms of personnel and skills. Are they sufficient for the tasks or are additional resources required via recruitment, training or out-sourcing? Certain tasks, such as the preparation of the marketing plan, are fundamental to the management of the marketing function. These activities must therefore take a priority of time and resource, so that they can be completed and “signed off” before the start of the business’s financial year. All other tasks can be scheduled to the calendar, with targeted completion dates.

In most businesses, marketing consists of two functional areas; sales and sales support.
The sales function, which is directly responsible for the generation of revenue by sales of product and services, is generally organized by markets and product groups. The sales support function is usually organized into specialist activities such as advertising and promotion, research and customer relationship management. Support to the sales function is initially by the provision of a marketing plan for the use of marketing resources to achieve the sales revenue objectives. Selling activity is directed by marketing research and supported by with advertising promotion and literature to maintain and develop customer relations.

Part of the CMO’s job must be to monitor and analyse market and sales performance, which requires an effective Marketing Performance Measurement system. In addition, the CMO must continually re-appreciate the current marketing situation and revise the marketing plan as necessary to meet changing requirements. The quality of organization and leadership is fundamental to good marketing management. Only by measuring marketing performance can one demonstrate how good the marketing organization is and whether the management delivers that which is expected of it.

© N.C.Watkis, Contract Marketing Service 17 Oct 07
Contract Marketing Service, (Specialists in Measuring Marketing Performance and Return on Marketing Investment.

Managing Marketing in Changing Environments

2007-09-27T14:48:00.000+01:00

Marketing is all about change and successful managers of marketing have to be able to adapt to the changing requirements of the market. Markets are by nature dynamic, in that supply and demand are constantly evolving, resulting from the prevalent economic and environmental conditions and the changing requirements of customers. This means that the marketing function of every business must continually adapt, if it is to successfully anticipate and satisfy customer demand profitably.

The prime responsibility of the Chief Marketing Officer, (CMO) is to generate and maximize sustainable profitable revenue for the business. Therefore, CMOs must be aware of the changing needs of customers and adapt their product or service and its delivery to satisfy them. However, despite the number of “business guru” books available that might suggest otherwise, there are no quick answers in business or marketing, and there is no “holy grail” of guaranteed success.

If the CMO is to achieve and maximize sustainable profitable revenue for the business, he must at all times look in two directions, one inward into the company, and the other outward to the market. Internally, the CMO needs to undertake a SWOT (strengths, weaknesses, opportunities and threats) analysis of the business. In addition, there should be a full marketing audit, to establish the level of corporate marketing knowledge, and to identify unsubstantiated assumptions. Externally, the effective CMO will assess the market environment by undertaking analysis of the political, environmental social and technical aspects that affect customer demand.

To meet with the problems of the dynamic and changing market, the successful marketing manager must be clear minded in analysis and ruthless in decision making.
Every marketing action should be examined on its contribution to the overall marketing objective, and every marketing investment of time and money must be evaluated on how it will contribute to the business. As the former Chairman of Singer and Friedlander Merchant Bank used to say when any investment proposal was discussed, “Will it make a shilling?”

Marketing performance must be monitored by marketers, using a measurement system that is based on key performance indicators and their specific revenue drivers, so that marketing actions may be adjusted to meet changing circumstances.

CMOs must be prepared to make changes in order to achieve success. Yesterday’s marketing solution may not fully answer today’s problem and may need adaptation to meet current conditions. The CMO must also be prepared for an uncomfortable ride. Staff may not like their assumptions to be questioned or have established practices to be examined. However, the effective marketer must be prepared to ask the awkward question, challenging the accepted perceptions and assumptions, and must continually question everything about the process of anticipating and satisfying the market profitably. Such questioning is not for the purpose of eliciting change for the sake of it, neither is it to create doubt and uncertainty, but to clarify thinking so that decisions may confidently be based on the best factual information. The only objective is to make and maximize sustainable profitable revenue. Short term profit will not do if it compromises growth and sustainability. Continuous growth is essential for a business to merely stand still against the normal attrition caused by competitor activity and market changes.

Even in small businesses the principles still apply. If the marketing department consists only of one individual they must consider every element of the marketing mix on the basis of its contribution to the generation of profitable revenue. The problem for the small business marketer is that having to undertake all the marketing disciplines themselves, they can often concentrate too much on specific activities, but lose sight of the ultimate need to generate sales and satisfy customers profitably.

Recent reports by the CMO Council in North America suggest that the position of Chief Marketing Officer is becoming a high risk position in business with many CMOs lasting two years or less in the job. This high turnover of senior marketing staff is not only bad for the individuals concerned, but bad for businesses, as it encourages rapid change and short term thinking. When companies seek long term sustainable revenue, frequent changes of CMO do not help.

The CMO cannot be successful in the overall objective of maximizing profitable sustainable revenue, without knowledge of the market, customer demand and competition. However, the CMO must also have the skill to successfully manage and direct the imagination, creativity, action and motivation of the marketing staff to anticipate and satisfy customer demand profitably. Ultimately, the only way to know whether the marketing function is efficient and effective, and whether the CMO has achieved the objectives, is to measure the results.

© N.C.Watkis, Contract Marketing Service 27 Nov 07
Contract Marketing Service, (Specialists in Measuring Marketing Performance and Return on Marketing Investment.)

Do Marketing Measurements Matter?

2007-09-04T14:44:00.000+01:00

Why measure Marketing performance? When considering the efficiency of a marketing organization, many companies invest far more than they realize in getting and maintaining their business with little attention to the return on their investment.

Many will still say that measuring marketing performance is difficult or that it is impossible, because marketing is an art not a science. But marketing is both an art and a science. The art is that of the creative, and the science that of performance and results. While the creative element perhaps may not be measured in any way that has quantitative value, marketing performance should always be defined in quantitative terms that can be measured.

The Chartered Institute of Marketing (CIM) defined marketing as “all those activities which anticipate and satisfy customer demand profitably”. While the CIM’s definition is logical and complete, current marketing articles tend to focus on the specialist disciplines of brand management, customer relationship management (CRM), advertising and research. The term “marketing” is now in danger of becoming debased, so that its meaning is imprecise and just another name for advertising or selling. This tends to perpetuate similar attitudes amongst marketers, limiting objectives and encouraging short term thinking. Taking the CIM’s definition further, marketing includes all those activities involved in getting, maintaining and sustaining profitable revenue. This in turn tends to broaden the scope of marketing into none traditional areas such as production, research and development and distribution.

Businesses are organized in many ways, but frequently they are organized as a collection of functional departments based on what they are, rather than what they do or achieve. Hence organizations have departments of accounts, sales, production, marketing, transport, personnel and many others.

For many companies, British and American, marketing appears to involve CRM, advertising, promotion, research, and product management with sales as separately managed area. This is often the case with business to business and non-consumer based companies. While it is reasonable to consider these various specialist areas of marketing separately, they are all contributing disciplines which collectively work to “satisfy” customer demand.

If “marketing” involves everything that anticipates customer demand profitably, then it must not only include sales, but a number of other areas not normally associated with it. Those areas would include research and development as well as production.
While many marketing managers see their role in a much narrower area of specializations, the overall manager of the marketing function should perhaps be referred to as the manager of business operations. In this manner, the term “Business operations” would be more accurately reflecting the definition of marketing as set out by the CIM. Business organization could then be structured more simply into two main areas, Business Operations and Business Support.

Business Operations would encompass all the separate activities of generating sustainable profitable revenue for the long term future by anticipating and satisfying customer demand. Business Support would encompass all those activities of resource management necessary for operations, such as finance, supply, and personnel.

In business, the only actions that can be measured effectively are those which have quantifiable inputs and outputs. There is nothing else. The sales organization requires investment to cover costs, but is the prime source of business pcosts, but no quantifiable output that is comparable in financial terms with other areas of the business. However, within marketing, successful selling requires the support of product management, advertising, CRM, market research and other marketing specializations. Thus the financial output from these specializations cannot be quantified or attributed to specific specialist areas; they are collectively included in the success of revenue achieved by the sales organization. Thus when seeking to measure marketing performance, all the various aspects of marketing activities must be measured collectively, in order to measure the financial input and output for the whole marketing organization, allowing financial comparison with other areas of the business.

Marketing organizations in companies are often poorly defined in terms of responsibilities and their contribution to the business. Being responsible for generating and sustaining the necessary revenue of the company, the importance of marketing cannot be underestimated. Because satisfying customer demand profitably is so important, managing the resources invested in getting and retaining business should be regarded as crucial. In reality, the evidence shows that companies do not regard marketing with the importance it deserves. The CIM report of 2006 showed that only 7 of the top 100 FTSE companies in Britain had a representative for marketing on the management board.

Senior management want to know what sort of return they are getting from all the money that is invested in marketing. Marketers need to provide answers that clearly show in financial terms the contribution they make to the business. The evidence of the CIM’s survey suggests that they fail to do so. Marketers can demonstrate their return on investment by measuring marketing performance as a whole, in terms of financial inputs and outputs comparable with other business areas. By measuring marketing performance, strengths and weaknesses can be exposed, necessary questions asked, and assumptions questioned. Only then can clear strategies and actions be put into place to ensure the long term continuity of profitable revenue, which is the prime objective of the marketing organization and the manager of marketing in particular.

© N.C.Watkis, Contract Marketing Service 04 Sep 07
Contract Marketing Service, (Specialists in Measuring Marketing Performance and Return on Marketing Investment.)

What does Marketing contribute to the “Bottom Line”?

2007-08-01T15:12:00.001+01:00

What is marketing’s contribution to the “Bottom Line”? As with many terms used in business, which have become fashionable jargon, the term “Bottom Line” has lost its meaning and become a business cliché. The generally accepted definition of “Bottom Line” is gross sales minus taxes, interest, depreciation, and other expenses. But, the term is also use to describe net earnings, net income or net profit, so that with more than one definition, defining the contribution of marketing to the “Bottom Line” is potentially more difficult. For this reason it is arguably better to look at the contribution of marketing to the generation of net earnings, income and profit, as these are the factors on which the success of the business is measured.

To demonstrate marketing’s contribution to the business as a whole requires a detailed marketing plan, that outlines and quantifies the objectives of the business and the marketing function. Such a plan should also include the detailed actions that are required to achieve the marketing objectives, and the measurements of performance to compare against the planned expectation.

Formal, quantified marketing plans are essential, if resources are to be allocated and managed effectively. However, marketing plans in themselves are no guarantee of the required results necessary to meet the company’s business objectives. Targets will only be achieved by the successful management of the whole of the business getting activities. Effective marketing managers need to have good leadership skills to inspire, motivate, direct and encourage the staff, who are responsible for delivering the results.

“Marketing”, is not another word for advertising or selling, but comprises all those activities which anticipate and satisfy customer demand profitably. In many businesses, marketing and selling are still seen as entirely separate functions. Yet if marketing “anticipates and satisfies customer demand profitably”, it must include selling as an integral part of satisfying the customer.

A recent book, “Marketing Due Diligence,” seeks to link marketing activity with the creation of shareholder value, as the “bottom line”. Although shareholder value is important and is considered by some to be the prime objective of any business, it is only part of the business equation. Every business comprises three elements, shareholders who supply finance, employees who do the work, and customers who supply the revenue. All three elements must be satisfied if the business is to remain in being.

The purpose of all marketing activities is to generate a continuous stream of profitable revenue without which there can be no sustainable business. While brand awareness, market penetration, customer retention and many other aspects of marketing are important, their contribution is collectively to assist in making the successful sales from which the revenue is derived. Thus marketing performance must ultimately be measured by the amount of profitable revenue generated, together with the efficient use of assets and investment.

If all the business getting activities are to be managed efficiently and effectively, then measuring marketing performance is essential. While efficiency may be considered to be about the capable use of resources, effectiveness is about decision making and getting things done. Unfortunately, while performance measurement gives an indication of efficiency, it is limited in assessing management effectiveness.

Performance data provides evidence of the effectiveness of the strategy and actions, in achieving the objectives of the business and marketing plan, by indicating which were successful and which were not. If the marketing function operated in a controlled environment, it would be relatively easy to identify successful marketing activities and to repeat them effectively. However, all business getting activities operate in a dynamic environment, where markets, attitudes, technology and the economic conditions are continually changing. Thus the strategies and marketing activities which were successful yesterday will not remain so indefinitely.

For the manager of marketing, satisfactory results shown in performance measurements will include the risk that comes with success, namely an over-reliance on the ideas and methods that achieved them. In order to ensure a continuity of success, the marketing manager must always question the ideas and methods that achieved the results, regardless of whether they were good or bad, in order to ensure that the assumptions and methods are still valid in changing circumstances. This means that marketers must be forward looking, requiring the imagination to interpret conditions and how they might develop, so new strategies and actions can be developed, or existing ones adapted to meet new conditions.

Whether it is described as the “Bottom Line,” “net earnings”, “income” or “profit”, the professional marketer must always be able to quantify the contribution made by the marketing function in the realization of the company’s business objectives, in order to justify the need for the continuity of investment.
© N.C.Watkis, Contract Marketing Service 24 Jul 07
Contract Marketing Service, (Specialists in Measuring Marketing Performance and Return on Marketing Investment.) CMC- InsightExec 01 Aug 07

If “marketing” is the generator of business revenue, why do Financial Officers generally regard “marketing” as only a cost?

2007-06-26T15:09:00.001+01:00

If “marketing” is the generator of business revenue, why do Chief Executives, Finance Officers and senior management frequently regard “marketing” as only a cost?

It is a common complaint amongst marketers that they are not understood by the finance department, and are always trying to justify their expenditure and their existence. Why is this?

The problem stems initially from the understanding of what the “marketing” function is and does. When asked which part of the business generates the revenue, most Chief Executive Officers (CEO) and Chief Finance Officers (CFO) will give the answer as being the sales department. When asked about what the “marketing” department contributes to the business, the answers tend to involve advertising, customer relations and market research and how much they cost.

The objective of the CEO is to develop sustainable profits for the long term benefit of shareholders, staff and customers. For the CFO, the objective is to maintain the cash flow in order to sustain the business, by maximizing the use of assets and minimizing the costs and investments. From this perspective, when trying to understand the contribution of “marketing” to the business, the sales organization tends to have the advantage, in that its investment in terms of costs can be measured, as can be its output in terms of revenue generated. In contrast, the activities of what is often perceived as “marketing”, that is advertising, customer relations product management and “marketing” research, can easily be measured in terms of the investment involved, but much harder to quantify in terms of financial contribution to the business.

Clearly, it would seem that most CEOs and CFOs do not fully understand what “marketing” actually is. However, judging by much of what is currently written, many marketers are so involved with CRM, brand position, advertising and research that they have forgotten the purpose of “marketing” in its original sense, and have concentrated on the narrow perspective of their own specialist discipline.

In 1976 the Chartered Institute of Marketing (CIM) defined “marketing” as being “all those activities which anticipate and satisfy customer demand profitably.” Thus what is termed “marketing”, should encompass and integrate all those activities which not only collectively produce revenue, but above all, profitable revenue.

Some may regard this definition as out of date, but all the activities involved in getting and retaining customers by satisfying their needs profitably, are interdependent and need to be considered together and not separately. Whatever these activities are collectively called, be it “marketing” or something else, they are collectively fundamental to the business as they generate the profitable revenue on which the business depends and their contribution must therefore be considered as a whole and not separately. These functions should be managed collectively under single structure, encompassing all those activities involved in getting and maintaining business, and not considered as separate business areas.

Marketers need to be able to communicate about their contribution to the business objectives within their own organizations, and in a language that is understood by their principal audience namely the CEO. CFO and senior management. Defining performance in finance and the “business doing” or “production” areas of a business is done in terms of management and financial ratios e.g. Net Profit/Equity Capital; Current Assets/ Current Liabilities; Production Contribution/Production assets. However, it has frequently been held by Marketers, that because “marketing” is more an art than a science, it could not be measured in any meaningful way, but this assertion is patently wrong. Marketing performance can and must be measured in such a way that not only can its contribution and costs can be clearly seen, but they are in a form which is also understood by both the CEO and CFO. This is best done in the form of business ratios, benchmarks and metrics, which are comparable with performance measurements from other areas of the business.

For too long, many ineffective marketers appear to be fixated by branding initiatives, image and other aesthetics. However this sort of information does not translate into financial and numerical data for the (CEO) and CFO in a manner that relates to the performance information from other areas of the business. The challenge for marketers is to present marketing performance measurements to the CEO and the management team in financial terms that they understand, like contribution and Return on Investment (ROI).

© N.C.Watkis, Contract Marketing Service 12 Jun 07
Contract Marketing Service, (Specialists in Measuring Marketing Performance and Return on Marketing Investment.) CMC- InsightExec 26 Jun 07

Are Marketers Suitable Managers of Marketing?

2007-06-04T16:28:00.001+01:00

The question “Are Marketers suitable managers of marketing?”, is an interesting one. On the face of it, the answer must be “yes”. But on examination the answer is more equivocal.

In theory marketers should be responsible for all those activities that “anticipate and satisfy customer demand profitably.” In practice, this is often not the case. While the other main elements of business, such as finance and production are managed by senior managers with overall responsibility for their respective areas, that of marketing, which is the driving force in producing the business revenue, is frequently not managed in that way at all.

Examination of the marketing press would suggest that many marketers have a different perspective of marketing and their responsibilities. One has only to see that the predominance of articles in the marketing press that revolve around customer relationship management (CRM), brand, advertising, product perception and public relations. There are also occasional articles on selling, but rarely on sales management. Very little is published about the management of marketing. Many marketers seem to have lost the understanding of marketing from the Chartered Institute of Marketing’s definition of “anticipating and satisfying customer demand profitably”, and view marketing on a narrower description, mainly denoting customer relations and different forms of communication and promotion. It would seem that for many, the role of senior marketing manager as being responsible for the generation of sustainable profitable revenue is not something that they would recognize.

When it comes to measuring marketing performance especially the return on investment (ROI), many marketers often confine their interest to measurements involved with CRM, advertising, promotion and brands. While measurement of performance in these areas is important for those executives who are the managers in charge of them, they are not indicative of the overall marketing performance. Individually these separate areas of marketing activity are not responsible for generating revenue. Even the sales organization is not solely responsible for bringing in the revenue, for while sales may be said to be the executive arm of “marketing”, its performance is supported by all the other disciplines of marketing, which collectively assist in making successful sales results

Several studies published earlier this year present different perspectives on marketing accountability, measurement and Return on Investment. They showed that many large marketing organizations have made significant progress in the development of sophisticated methods to improve marketing measurements. But for many organizations the plethora of measurements available tends to suggest that they are largely approached in isolation, such that it is difficult to assess overall marketing efficiency and effectiveness of the collective marketing effort.

With few exceptions, marketing department appear to measure marketing performance and “payback” in a disjointed series of technically sound but “Ad Hoc” methods. In many companies, information collected on customers, often looks at how prospects become customers, including tracking the progression, from awareness to preference, to trial and repeat purchase. Satisfaction with the customer experience is measured by surveys and reported. With some companies, the customer measurements includes attitude data on customer segments, - why they want what they want, - which is often correlated with actual customer transaction data to create a segmentation model. The segments are then monitored for mobility from one market segment to another.

Other data is used to show what was sold, where and at what price, the detail of the information tending to be governed by the underlying IT systems employed. Information on cash flow generation tends to be concentrated on the efficiency of marketing expenditures in achieving short term returns. Programme and campaign Return on Marketing Investment (ROMI) models are used to measure the immediate profit impact expected to be derived from a given investment initiative.

Survey based tracking systems are used to gauge customer and prospective customer perspectives on the brand, regarding its functionality, personality accessibility and value propositions. Brand scorecards monitor the evolution of these perspectives over time within market segment. Some companies have developed successful financial models for estimating the financial value of the brand as a means of determining its balance sheet value as an outcome of marketing investment.

All these measurements provide essentially short term information. It is generally understood that the majority of marketers only stay in post for 18 months to 2 years, thus their outlook is essentially limited.
Business and marketing plans are normally prepared as a five year rolling plan with annual reviews. To be effective, such plans need long term management. Frequent changes of management are not compatible with the effective execution of such plans

The objective of the chief executive officer (CEO), is to deliver continuity of sustainable profits for the long term, thus the CEO requires the chief marketing officer to deliver a continuity of sustainable profitable revenue. However, if marketing is the main revenue driver of a business, it requires planning and management for the long term, to provide the necessary continuity of sustainable revenue. It may be considered thought provoking, but there is a case for the effective overall management of the marketing function to be carried by a non marketing executive who knows and understands the concept of marketing contribution and optimum performance, and is able to knowledgably question and manage his specialist marketers.

If marketers want to have overall charge of all the business getting and retaining functions, they must learn to measure, manage and report on the performance of marketing as a whole, and in a way that is compatible with other areas of the business. In short, marketers must learn to be effective managers of the whole of the marketing function for the longer term, not just specialist areas for the short term, if they want to be regarded as professional managers deserving of a place in the boardroom.

© N.C.Watkis, Contract Marketing Service 25 Apr. 07
Contract Marketing Service, (Specialists in Measuring Marketing Performance and Return on Marketing Investment.) CMC- InsightExec 04 Jun 07

Board Representation for Marketing requires evidence of performance

2007-02-19T16:26:00.001Z

A survey in late 2005 by the Chartered Institute of Marketing revealed that just 11 of the UK’s FTSE 100 companies have a marketer on the main board. If marketing encompasses all the “business getting” activities of a company, it seems strange that as the main revenue getting activity it has no Board representation alongside that of finance and operations in the majority of companies. Perhaps the problem lies with marketers themselves. Many still see marketing as more of an art than a science, and are more interested in the creative side, such as advertising and promotion, and to a lesser extent customer relationship.

In fast moving consumer goods businesses, the marketing function (including sales organizations) tend to be large. However, in industrial and business to business organizations, while the sales organization may be large, that of marketing is often small by comparison and frequently a separate department. However, the division of sales and marketing, tends to fragment what should be collective endeavour, into competitive animosity. Marketing is frequently perceived too narrowly, in terms of advertising and sales, and lacking the quantifiable accountability of Finance and Production, fails to prove and justify its contribution.

The question that arises is, “Do marketers only understand the individual elements of marketing activity, rather than understanding the management of all the “business getting” activities of marketing as a whole? If marketers are not able to quantify the contribution of marketing to a business, then their credibility as managers will be insufficient to merit membership of a Board of Directors.

In many companies, the sales function is treated separately from marketing or may be at best combined into a sales and marketing department. But if marketing encompasses all those activities which anticipate and satisfy customer demand profitably, then the scattering of those various activities around the company organization makes no sense, and prevents good management.

“Sales” is the executive arm of marketing. We do not “Market” products and services. We advertise, promote, and sell products. To be effective, sales requires the direction provided by marketing research and planning, together with the support of advertising. If all the separate Business Getting activities which anticipate and satisfy customer demand profitably are to be effectively managed then they must be managed as a “whole” and that “whole” is “Marketing.”

As the business getting function of an organization, marketing is of major importance, but its ability to satisfy customer demand is not entirely in its own control, as Production or service provision have a major contribution. For this reason, marketers must not only be able to measure marketing performance, to ensure that resources are being used effectively, but also be aware of the performance of production and service provision in the generation of overall profit.

In most businesses, the various departments generally see their own performances in isolation. The challenge for the Chief Executive Officer is to encourage separate departments to become more integrated to the common goal of making long term profits. To that end all business departments have a responsibility to provide measurements of their own performance, but should also have an interest in the performance other departments which have effect or are effected by their own activities. This is particularly important with marketing, whose success or otherwise will have effect on such areas as finance, production, and personnel. To be more effectively managed, marketing may need to be organized differently.

Generally, businesses are organized around the main constituent parts, namely: finance, production and sales (marketing), with other areas tacked on such as personnel, buying, transport etc. An alternative model for business organization is to divide it simply into two parts, Operations and Support.

The “Operations” side would be concerned with all those activities which are collectively and directly engaged in generating revenue. This would include marketing and production or service provision. The “Support” side would encompass all those functions which provide the resources for operations, including finance, personnel, supply (purchasing) etc. Every company department or function would therefore be ascribed to operations or support.

Under the “umbrella” of Operations, both the Marketing and the Production functions would remain as separate management activities, but would become more integrated. Marketers would therefore, have to take more account of the performance of the Support side which provides marketing’s resources. Regardless of how a business is organized, marketers must understand that they do not work in isolation. While their objective is to develop and maintain a continuous revenue stream, they require the resources of other business functions. Marketers need not only to monitor the performance of their own responsibilities, but to take an interest in the performance of those other business activities which support their own.

Implementing marketing plans and achieving their objectives cannot be done effectively without a full understanding of the measurements of marketing performance. But neither can implementation be achieved without awareness of marketing’s effect on those other business activities which support it. Performance measurement is the key to understanding the effectiveness of any business organization. Marketing performance measurement should not therefore be considered in isolation from the performance of other business functions or the business as a whole. If marketers want to qualify successfully for Board of Director status, they must prove that not only can they manage their budget and resources effectively, providing quantitative evidence of their profit contribution, but can also fully appreciate the performance of all the other supporting functions that are integral with the business.

© N.C.Watkis, Contract Marketing Service 19 Feb 07
Contract Marketing Service, (Specialists in Measuring Marketing Performance and Return on Marketing Investment.) CMC- InsightExec 19 February 07

Do Marketing Measurements Indicate Management Performance?

2007-01-10T16:24:00.001Z

“If you can’t measure it, you can’t manage it” said Peter Drucker. This statement applies as much to the Marketing function as it does to every other part of business. However, the statement does not say that “If you can measure it, you can manage it”, and that is certainly true of marketing. Measuring marketing performance does not guarantee good management, but is an indicator of management performance.

Marketing, which generates profit by anticipating and satisfying customer demand, requires considerable investment in money and resources, and is at the heart of every business. It is much more than just the advertising budget, and to measure the return on marketing investment requires a deeper understanding of all the activities which go to satisfying customer demand profitably. If all marketing is investment, why would companies not want to assess the returns on their money? Increasingly Chief Executives and Financial Officers are looking to ensure that measurements of the return on investment are used across the whole business area, including marketing. Marketing managers must now not only deliver a return on the investment but also be seen to do so and be able to prove it.

Marketing is a broad subject, covering every aspect of a business that anticipates and satisfies customer demand profitably. If follows that Marketing encompasses a wide variety of subjects from market research, product planning, selling, advertising and promotion, distribution, business planning and a host of other aspects that are not purely finance or production centred. For the executive charged with managing the marketing function of a business, the diversity of marketing activities, means that the job is a complex one. In many companies, the chief marketing executive may not be a professional marketer, but is a manager responsible for a staff of professional marketers and employees. For the executive responsible for managing the whole of the marketing function, it is often difficult to know where to start.

Marketing, like most business activities, has changed a lot over the past twenty years. Up until the early 1980s, most marketing activities were manual processes. Data bases were based on card indexes, spread sheets were manually created, with calculating machines only becoming available from the mid 1970s. This meant that all marketing activities took a long time in preparation and delivery. Analysis of marketing activities was limited, and the convenient view that marketing was an art not a science, allowed the misconception that market performance could not be measured, to be the generally accepted view. Computerization has now swept most of those preconceptions away. The revolution in the marketing function means that manual activities, which in the past took days or weeks to complete, can often now be done automatically. A sales and profit projection which may have taken hours to produce in the past, may now be repeated, with varying inputs, to produce a variety of scenarios in a matter of minutes. Businesses are now able to measure performance across all marketing activities and to quickly identify business opportunities, threats and trends. As the amount of this information has grown, so has the complexity of managing the many aspects of the marketing function.

The purpose of any commercial business is to make profits for the benefit of its shareholders and employees by satisfying customers. The objective of the chief marketing executive (CME) is to maximize profitable revenue while minimizing costs and the use of assets. Maintaining the relationship of profit, costs and assets used is the marketing management problem.

To achieve this objective, the CME must often manage a team of marketing specialists, and ultimately be responsible for a variety of delegated tasks, including planning, market research, selling, advertising, distribution, and many other customer related activities. However, the most important asset at his or her disposal will be the delegated experienced staff, who carry out the specific activities. To be successful, the CME will require good leadership skills to inspire, motivate, direct and encourage the staff, to whom he must delegate responsibility to deliver results. At the same time, the CME must institute the continuous management process of the Marketing Cycle for managing marketing and business information and for the development and execution of necessary actions, including the continual assessment and reassessment of performance.

In Dr James Rieley’s book “Leadership” ( Daily Telegraph/ Hodder and Arnold), he points out that a pre-occupation with numbers can blind the manager. After all, it is people who get results. Metrics and measurements provide an excellent guide to the immediate past performance of all the marketing activities, but their future performance is dependent on the staff involved who have to deliver them.

The CME will rightly be judged on the measurements of marketing performance he delivers, but that performance will be dependent on his or her ability to motivate, organize and lead the marketing team to achieve their objectives. Measuring marketing performance is an essential indication of recent past and current performance to identify where resources and assets are used to best effect. Only effective leadership and management can direct and motivate the staff, to maximize marketing performance to achieve the marketing objectives.

© N.C.Watkis, Contract Marketing Service 10 Jan 07
Contract Marketing Service, (Specialists in Measuring Marketing Performance and Return on Marketing Investment.) CMC- InsightExec 10 January 07

Today’s Marketing Metrics Don’t Guarentee Tomorrow’s Performance

2006-12-14T16:06:00.001Z

The danger with marketing performance measurements, metrics, score cards and the like, is that they tend to be prescriptive, and can stifle innovative and creative thinking. Concentrating on numerical outcomes and standard processes while important, tends to encourage the idea that so long as certain actions are carried out, success is assured; - it isn’t. In any business, the only thing that is assured is that unless the level of profitable revenue exceeds the level of investment and costs, profit cannot be achieved. If profit is not achieved, the business becomes insolvent. The only thing that counts in a business is its ability to make profits, which is the sole reason for its existence. The importance of customer relations, product satisfaction, and employee relations are that collectively they are mutually supporting and contributory to the development of sustainable long term profit.

All those business getting activities collectively known as “Marketing” have to be measured as a whole. While some marketing activities are easier to measure than others, the fact is that they are all interrelated to support the gaining of sales revenue.

In many businesses, sales and marketing are regarded as two separate functions, and in some cases are known for their rivalry and distrust. But in any organization, every element is actually interdependent. In the marketing function, the sales organization is the executive arm. Market research, advertising, and product development, are all there to direct and support the sales function. Only the sales function produces revenue, but its ability to produce profitable revenue is largely governed by the effectiveness of other marketing functions, research, product development, and advertising support. Selling is easier and more productive if supported by effective advertising, as a successful advertising campaign can increase product awareness which may contribute to increased sales. However, with the exception of response advertising, advertising is rarely instrumental in directly contributing to the sales revenue target.

For the marketer, statistics, metrics and measurements provide information on the business situation as it was up to the time of the collection of the data. It details the performance of the marketing organization up to that time, but it is not a statement of future performance. The Marketing organization may have the proof of the success of its activities, but that does not mean that it will have the same future success. Circumstances may have changed so that the successful activities of yesterday will be less productive in tomorrow’s changed environment. For this reason, Marketing must always be looking forward to try to anticipate the future changes in the business environment.

The larger the organization the more that individuals seek to justify their contribution by showing compliance with various check-lists of activity, regardless of their contribution to the business. For the marketing organisation, the most important measure of its contribution is the amount of profitable revenue generated, the second measure is that of the efficiency with which resources are used to generate that revenue. However, these measurements when taken over a period are only a guide to the possible future performance, but they are not a guarantee.

Forecasting and planning are essential for any business which seeks sustainable long term revenue and profits to secure its future. The success of forecasting is dependent on market knowledge and experience, and to some extent luck. Setting targets of necessary performance is based on knowledge of the market, and experience of the past performance in the use of resources.

Frequently, marketing metrics and measurements are taken in isolation and their individual importance exaggerated, e.g. data on customer’s product awareness is interesting, but it is only a contributory factor in revenue generation.

The prime purpose of measurements is not to prove that performance is on target as predicted, but to prompt questions about the ability to maintain and improve future performance in the achievement of profits. It will be the ability to define the questions that will direct future performance, and to the gaining of accurate answers that will contribute to future sustained performance. The current indicators of present and past performance may not be relevant in the future, when measuring performance in a changed business environment, may require different performance criteria for the sustained production of profits.

The importance of marketing performance indicators is not in their individual values, but in understanding their meaning, how they inter-relate, and what questions should result. The ability to interpret those answers so that the significance of performance indicators may be understood and result in positive action, is fundamental to good management. Without resulting positive action, performance measurements are meaningless. But performance indicators can gain a false importance, if altered circumstances have reduced or changed their significance. When reviewing performance indicators, the first question should always be “So what?”

The marketer’s job is to interpret results and to institute positive action that will assist generating sustainable sales revenue. If the data collected does not contribute to positive management action, then either the indicators or the management must be changed.

© N.C.Watkis, Contract Marketing Service 13 Dec 06
Contract Marketing Service, (Specialists in Measuring Marketing Performance and Return on Marketing Investment.) CMC- InsightExec 14 December 06

Score cards and metrics – are they an unnecessary distraction?

2006-11-21T16:04:00.001Z

For some time, business has been the subject of Best Practice, Dashboards, Balanced Scored Cards and other initiatives, all designed to improve business efficiency. In the business getting activities known as marketing, similar ideas have taken hold in the form of Total Quality Management (TQM), Return on Investment (ROI) and Marketing Metrics. All these processes are potentially important to business. However, the question is do any of these initiatives actually work? If so to what extent and do they ultimately improve the business.

The popularity of marketing and management books such as “In search of Excellence”, and the writings of Tom Peters and others suggest a desire to find a winning formula that will make for a successful business. However the large sales of successive books with differing answers might suggest that readers are hoping to find the “holy grail” of the instant magic solution to success..

Marketing also has a large number of academic books on the subject with complex and sometimes conflicting views on what makes success. Most books would agree that measuring marketing performance is essential if marketing management is to be efficient and effective, but few seem to agree on how and what should be measured, and to what purpose.

The marketing manager’s job is to maximize profitable sales revenue while minimizing costs and investment. Measuring performance by quantified results allows performance to be judged against a target or score card, enabling management performance to be assessed.

Marketing performance indicators, balanced scorecards and dash-boards should be useful indicators of performance that prompt awkward questions to elicit necessary facts for informed decisions and actions. Measurement for the sake of it, can hide problems rather than highlight them. Balanced score cards may be useful one day, but give false impressions when times and conditions change, while the Return on Investment (ROI) may look satisfactory, but its true significance may only be judged in relation to the market conditions at the time.

Businesses may have established their own internal standards for measuring marketing performance such as sales per employee, return on assets, and operating profits, but they must be checked regularly to ensure their continued relevance in changing markets and conditions.

Many Government and private organizations, use checklists and scorecards as a way to prove efficiency and effective management. Check lists enable processes requiring repetitive and complex actions not have to be committed to memory, reducing the danger that some elements might be missed. For the marketer the danger is that checklists can produce an over concentration on processes rather than outcomes. Going through due process may be important, but ultimately it is results that count, which means maximizing profitable revenue and continually reaching the financial targets of the marketing plan.

In many businesses, exceeding the revenue target results in bonus payments. However, exceeding the revenue target can seriously damage the balance of the overall marketing budget and plan, by incurring variable production and other costs, and reducing profitability. If the marketing plan is adhered to, then the revenue, profits, and costs should all be in balance as planned, but veering from the objectives set especially in sales and revenue, can seriously damages success.

Measuring marketing performance is vital for effective management. Most numbers and measurements are relatively meaningless except when shown in relation to other factors and marketing management metrics and ratios are no exception. Achieving targets is important but are the targets, objectives and processes relevant? Marketing and business principles remain the same, but the application of those principles may need to change as circumstances develop in order to sustain continued success. If a company exceeds its sales target and achieves a sales growth of 8%, but the market has grown by say 15% over the same time, then market share will have been lost, because market growth was not taken fully into account during marketing planning.

While ensuring the continuity of profit it the key to business success, continuous past success is no guarantee of the future. Metrics and score cards show what performance has been achieved, but cannot predict the future results. Recently, those companies involved in online betting had seen considerable and continuous growth in their businesses, with their major market in the USA. However, they seemed to be caught totally unawares by new legislation that not only outlawed their previously legitimate business, but caused the arrest of their senior executives when visiting American soil. The result has been a considerable drop in their revenues and profits, and a serious drop in their share prices. That result could not have been predicted by score cards and metrics, but marketers should have been aware of the threat to their business.

When the Chief Executive Officer asks,- How well are we doing? Are we doing well enough? How do we know? the marketer must provide the answers. Check lists for procedures and performance measurements are aids to successful management, but slavish adherence to them without thought to the relevance of the outcome can also be a serious distraction from the ultimate objective of generating sustainable profitable sales revenue.

Marketing measurements are a necessary management tool to assist effective decision making. Like all business statistics, they should therefore be used selectively according to their relevance to effective management at any time. Whatever, scorecard, process or measurement is used, always the marketer must ask, “Is this relevant to effective management of the marketing function, or is it an unnecessary distraction?” Results must be sustainable. Too close adherence to checklists and score cards can lead to short term thinking and a failure to sustain long term results.

© N.C.Watkis, Contract Marketing Service 30 Oct 06
Contract Marketing Service, (Specialists in Measuring Marketing Performance and Return on Marketing Investment.) CMC- InsightExec 21November 06

Marketing Measurements, how many Metrics?

2006-09-26T16:01:00.001+01:00

The recent book, “Marketing Metrics” by Farns, Bendle, Pfiefer and Anderson, claims that there are over 50 metrics every executive should master. However, faced with such a number, most marketers are likely to want to know whether all those metrics are equally important or whether some are more important than others.

Before trying to identify the more important “metrics,” it is necessary to clearly define the term. “Metrics,” are usually defined as a measuring system that quantifies a trend, dynamic or characteristic. However, this definition is not universal. Laura Paterson of VisionEdge Inc. defines “metrics” as the standards for measurement, providing target values that a company must achieve to reach a certain level of success. “Measurements” she defines as the raw outcome of a quantification process, such as a company’s numbers, ratios and percentages, and “Benchmarks” as the standards against which all others values are judged.

Much of what is written about metrics and marketing performance measurements relate to large companies involved in fast moving consumer goods (FMCGs). For many marketers it is difficult to relate these kinds of metrics and their relevance to small and medium sized businesses, especially if they are involved in services, partnerships or consultancies. Similarly, relating such metrics to businesses involved in industrial markets or in long term contracts is even more difficult, but it is not impossible. In fact, measuring marketing performance in both significant and useful ways is both essential and possible for every type of business.

Marketers will be interested in measuring performance in their own areas of responsibility, product management, advertising, or sales. However, measuring performance of the whole marketing function requires the Chief Marketing Officer (CMO) to identify those metrics which are fundamental to the business.

The first questions that the CMO should ask are; are we making revenue? Are we making profits and how much? From where do the profits and the costs arise? Is the marketing growing or shrinking and at what rate? Are sales and profits growing in line with or different from the market? Answers to these questions provide the initial framework on which more detailed analysis of marketing performance may be made.

The most effective way of measuring performance is by measuring output. In many businesses, the first measures of marketing are involved with sales, usually in terms of volume, value and customers. These areas are easy to measure, and having a true and tangible output that is quantifiable, are of fundamental importance. By contrast, measurements of customer perceptions may only be done by subjective surveys which have limited importance.

Measuring marketing performance should be done on a regular and continuous basis. Ideally, business data should be collected automatically and processed into usable metrics so that comparisons and trends may be easily made and identified. Marketing metrics are only indicators of performance, so comparison with other measurements and previous metrics are essential if the data is to have any value. Metrics in isolation are of little or no value.

The prime objective of the marketing function is to generate profitable revenue Metrics should therefore identify those areas of the market, that generate profitable revenue, as well as areas and activities, that incur costs rather than profits.

Two significant measures of performance are ROI and ROMI. “Return on Investment” (ROI), is often confused with that of “Return on Marketing Investment” (ROMI), but these terms should not be interchangeable. Return on Investment (ROI), refers to the net income divided by the capital employed. But in 2005, the American Marketing Association identified six other interpretations of ROI that are currently in use.

However, the “Return on Marketing Investment,” (ROMI) is generally used to measure the financial performance of specific marketing activities such as an exhibition or advertisement. Because it is difficult to identify which sales are attributable to which activity, ROMI is generally limited to measuring specific marketing investments, and is not readily applied to the marketing function as a whole.

Measuring market share for a large company may be important, but for many businesses, it is probably more important to ascertain whether or not they are gaining market share in a growing or shrinking market. This may be done by comparing the business’s rate of sales growth in a specific market, with the growth trend for that specific market. It would also reflect on the relative effectiveness of marketing activity.

If for example, the rate of product growth exceeded that of market growth, then marketing activity would be judged effective. Whereas, if the product growth was less than that of the market, it would be judged ineffective.

Marketing measurements and metrics are there to answer the questions: How much business has been gained and at what cost? Is the cost too high or would more business be gained by more investment? Is the balance of cost and investment about right in relation to the return of profitable revenue?

The most important measurements for any business will be those where there is a quantifiable output rather than a subjective analysis. Before collecting any marketing performance data, the marketer must be sure that they understand the true significance of any metric, what it actually means, and how useful the information will be in forming informed decision making.

There is no specific number of measurements that the effective marketer must have, but Revenue, Profit, and Return on Investment are fundamental for every marketing organization. For many small companies the number of important measurements and metrics will be considerably less than 50, but for the larger and more complex businesses the number will be considerably more.

© N.C.Watkis, Contract Marketing Service 17 Sep 06
Contract Marketing Service, (Specialists in Measuring Marketing Performance and Return on Marketing Investment.) CMC- InsightExec 26 Sep 06

Nothing Succeeds Like Success

2006-08-15T15:59:00.001+01:00

“Nothing succeeds like success,” but when marketers need to claim success for their efforts, how are they to do it? How can marketers “deliver” and what in fact is it that they are delivering? What contribution do marketers make and where is the evidence? What does the marketer need, to ensure success?

The contribution of Marketing to any business, is to be found in the generation of profitable revenue. Without that profitable revenue there can be no sustainable business. Thus marketing must ultimately be measured by the amount of profitable revenue generated. That is not to say that brand awareness, market penetration, customer retention and many other aspects of marketing are not important, but ultimately, the purpose of all marketing functions is to generate a continuous profitable revenue stream for the business.

Thus the amount of profitable revenue generated together with the efficiency of the use of assets and investment, must be the primary measures of marketing performance.

Much of what has been written on the subject of measuring marketing performance tends to have concentrated on particular aspects of marketing, principally CRM data, the return on investment in advertising, brand awareness and market penetration. For the brand manager, the advertising manager and those involved in CRM data management, performance measurements in their respective areas of responsibility are all important.

The purpose of measurement in Marketing, as in any other facet of business, is to establish the level of results derived from marketing plans and execution. Metrics and measurements act as indicators of performance and as a guide to future action. Without future action, there is no purpose to collecting marketing performance measurements of any kind.

A new book on the subject of measuring marketing performance, “Marketing Metrics 50+ Metrics Every Executive should master” actually lists over 114 metrics excluding sub-metrics. But it is open to question whether all those items listed as “metrics” are really measurements, which used to be called “management ratios”.

Metrics are the standards for measurement, providing target values that a company must achieve to reach a certain level of success. Measurements are the raw outcome of a quantification process, such as a company’s numbers, ratios and percentages, while Benchmarks are the very best measurements to which to aspire, the standard by which all others are measured.

Unfortunately, many marketing people misuse the word “metrics”, when in fact they mean measurements or management ratios.

Marketers often complain that marketing measurements are not actually very informative. If that is so, then the wrong things have been measured. Choosing the right things to measure is dependent on what one needs to know in order to make informed decision. Collecting volumes of marketing measurements achieves nothing if the information does not directly assist in informed decision making.

Marketers are getting better at measuring the performance of specific marketing activities. However, except for specialist response advertising, most advertising campaigns cannot be linked directly to specific sales, neither is it usually possible to ascribe specific marketing actions to specific marketing results.

Brand awareness, market share and other measures all have a certain importance, but all the separate elements of the marketing function are interdependent, collectively contributing to the overall contribution of marketing, so that marketing performance must be measured as a whole.

The purpose of any commercial business is to make profits for the benefit of its shareholders and employees, by satisfying customers. It is the job of the marketing function to generate profitable revenue by satisfying customer demand. It does not matter how good the marketing strategy, the promotional support, the advertising campaign, the market research, the customer relationship management programme or anything else is, if the business’s sales organization cannot close the sales, then the revenue cannot be realized.

The objective of the chief marketing executive (CME) is to maximize profitable revenue while minimizing costs and the use of assets. To achieve this, he or she must understand all the activities involved in getting and maintaining business by asking questions, avoiding assumptions, and seeking quantifiable proof of achievement through marketing performance measurement.

Effective management is necessary to convert marketing plans into actions and to achieve results. The continuous monitoring of marketing results provides indicators of performance, highlighting success, failure, and identifying problems. For the CME, performance measurement is an essential tool of management by which marketing’s contribution is measured.

But marketing measurements are only indicators of performance. Converting marketing plans into successful actions requires the CME to inspire, motivate and direct those staff responsible for carrying out the separate marketing tasks, to reach their initial objectives and encourage further achievement. It is only the effective leadership and management of all marketing activities that will determine the level of overall marketing success.

© N.C.Watkis, Contract Marketing Service 15 Aug 06
Contract Marketing Service, (Specialists in Measuring Marketing Performance and Return on Marketing Investment.) CMC- InsightExec 15 Aug 06

Marketing Leadership gets Results

2006-07-20T15:50:00.001+01:00

If marketing investment is to be productive, it requires efficient and effective management. “Efficiency is doing things right; effectiveness is doing the right things.” Said Peter Drucker, but what does efficient and effective management require in the “marketing” context?

Every successful manager has also to be a “leader”. Much has been written about leadership, but the essential requirements of a leader is to be able to balance the respective needs of the task to be achieved, the team to carry it out, and the individuals of that team.

The chief marketing officer (CMO) is frequently responsible for writing the marketing plan that is to achieve the objectives of the overall business programme. Writing a good marketing plan and successfully implementing it to achieve the desired goals, are plainly two different things. How many marketing plans which are well thought out on strategy and accepted by the company, fail when it comes to achieving the stated objectives?

There are many books and courses available to the marketer, to improve his or her skills in marketing strategy and planning. But the art of successful marketing lies not just in writing good marketing strategies, but in enacting those plans and achieving the planned objectives.

To be successful as a marketing manager, the CMO must display the necessary qualities of leadership in the workplace to achieve and maintain results, but how should this be achieved?

The job of the CMO or Marketing manager is to maximize profitable revenue, while minimizing the costs involved and the assets used. To do this, the CMO must be good at resource management with good leadership abilities, not only looking after his marketing team needs, but also be a good motivator to look after the needs of the team individuals. The CMO’s business is essentially that of knowledge. That knowledge must be gleaned from all sources, especially the business employees.

The CMO must know about the market, the customers, market trends, products, the competition and many other things. In addition he or she must understand all the activities involved in getting and maintaining business. As a manager, he or she must ask difficult and searching questions, avoid assumptions, and seek quantifiable proof of performance, but as a leader, he must also know and understand the requirements of the marketing team and especially the individuals involved.

For the CMO, the source of most of this knowledge will be based on the process of the Marketing Audit, to provide answers to the marketing questions. The continuous measurement of marketing performance together with the regular use of the Marketing Audit provide the CMO with the most important structured management tools, which deal with the marketing process. However neither of these tools deals with the managing, leading and motivating the marketing employees who are entrusted with the actions that get the results for the marketing plan.

Amongst the many marketing performance indicators, those relating to the selling organization have the most direct bearing on management and leadership. Performance indicators in the sales area can show an immediate response on the sales performance, providing clues to motivation, training, market trends and essentially the fulfilment of sales and revenue targets.

The successful sales manager must be seen to demonstrate leadership to the sales organization, in order to maximize and maintain the necessary performance in reaching sales targets, minimizing costs, while maintaining the motivation and enthusiasm of the sales team.

By contrast, the CMO by definition is further removed from both the sales organization and other marketing executives, as he needs to take an “overview” of the marketing organization. Demonstrating the necessary leadership of the whole marketing organization is a more difficult prospect for the CMO, requiring the additional ability to be a good listener and communicator.

The continuous measuring of marketing performance is essential if management objectives are to be met. But marketing measurements are only indicators of performance, highlighting success, failure and identifying problems. However, it is down to the CMO to use his skills as an effective manager to ensure that problems are identified and overcome, so that the marketing and business objectives can be met.

Leadership in marketing management is not about simply hitting goals and targets. Achieving business and marketing objectives can be met by “driving “the organization and its staff. However, experience shows that such methods are ultimately counter productive, and may cause the most important asset, the experienced marketing staff “to vote with their feet”.

Effective leadership should inspire and motivate the marketing staff to rise to the challenge and achieve the required objectives. With a good marketing plan, a well led marketing team, managed resources, and well motivated individuals, the CMO has the best chance of successfully implementing the marketing plan and achieving its goals.

Readers who would like to know more about effective leadership in marketing management, and management generally would do well to read “Leadership” by Dr James B. Rieley, published by The Daily Telegraph and Hodder Arnold.

© N.C.Watkis, Contract Marketing Service 20 Jul 06
Contract Marketing Service, (Specialists in Measuring Marketing Performance and Return on Marketing Investment.) CMC- InsightExec 20 Jul 06

Marketing performance– how much information do we need?

2006-06-21T15:37:00.001+01:00

Does Marketing suffer from “information overload”? There is a growing demand amongst marketing people and amongst those who fund marketing activities for the measurement of marketing performance. But marketing is a broad subject, involving all activities engaged in anticipating and satisfying customer demand profitably. As such, marketing activities encompass virtually everything in a business which is not purely to do with operations or finance, so the opportunity for performance measurement information can be vast.

A lot of marketing measurement routinely covers particular aspects or activities such as Customer Relationship Management, (CRM), advertising, brand awareness etc. Each area is covered in a plethora of data and statistics. However, collecting information for the sake of it is time consuming and wasteful. Without verifiable information, marketing is based on assumption and guesswork. Too much information can lead to confusion and bad decision making.

The question is, does all this information help the Chief Executive Officer (CEO) or any other level of devolved management, make decisions? Is there too much information and is it the right sort? What information does the CEO or other decision makers need, and in what form should it be, in order to make valid informed decisions? The CEO needs indicators of business performance which show the level of financial return yielded from the investment in marketing, as well as prompting questions on the marketing strategy and the efficiency of the marketing organization. At the same time, professional marketers need evidence to demonstrate their performance as responsible executives.

Senior management should specify the information that they require from their subordinates, in order to gage that the organization is performing as required. Subordinate managers must be allowed to manage the operations and resources for which they are responsible themselves, without being subject to micro management by senior management.

In marketing, this means that the CEO should want to know how the overall marketing investment is performing, together with information on future trends that will affect revenue, competition and profits, rather than the performance details of each marketing activity.

In any business, the marketing director’s job may be summed up as managing resources in such a way as to maximize profitable revenue, while minimizing costs and the use of assets. Thus the key measurements of marketing performance will demonstrate the amount of financial contribution made by the marketing function to the business, and the efficiency with which it is generated.

From the CEO’s point of view, provided that the main performance measurements from marketing are satisfactory, the provision of more detailed marketing information is probably superfluous, and indeed may act as a distraction to effective decision making. For the Marketing Director, his obvious interest will be the measures of performance which he must pass to the CEO, but also the indicators of performance generated by subordinate managers responsible for product or service ranges, specific markets, sales organization, distribution, marketing support etc.

Measurements of marketing performance on their own are rather meaningless unless what is measured is defined and understood. The term Return on investment (ROI) is often confused with the term Return on Marketing Investment (ROMI). These terms should not be interchangeable, as the former, (ROI), refers to the net income divided by the capital employed, while the latter (ROMI) is generally used to measure the financial performance of specific marketing activities such as an exhibition or advertisement.

Because it is difficult to identify which sales are attributable to which activity, ROMI is generally limited to measuring specific marketing investments, and is not readily applied to the marketing function as a whole. However, to add to confusion, the American Marketing Association and Aprimo Inc., identified six other interpretations of ROI currently in use in 2005.

Marketing performance measurement should be judged in comparison with a business and marketing plan, as well as to the external marketing environment. Using measurements of marketing performance without reference to the external factors of the market and economic conditions can give a misleading impression of efficient and effective performance.

To be used as an effective management tool, marketing performance measurement should be done on a continuous basis. All too frequently, if marketing performance is measured, it is measured as almost a “one off” activity done as and when thought necessary. Measurements from CRM are usually seen as a continuous activity, producing indicators of customer trends from which marketing strategies may be devised and informed decisions taken.

However, the measurement of each area of marketing activity when taken separately, does not in itself indicate the overall level of marketing performance. CRM information may help guide the sales strategy, which may also be supported by the success of the advertising plan.

But while each area may succeed in relation to its own plans and objectives, the only real measure of its success as far as the marketing function is concerned is the amount of profitable revenue that it generates. If the advertising and promotion produces a direct revenue response, then it could be viewed as a profit centre within the marketing function and its performance judged separately.

Similarly, if a website is a direct revenue generator then it also should be considered as a marketing profit centre and managed accordingly. However, in most cases, the marketing function cannot be broken down into separate self supporting profit centres, but is interrelated so that the output of the marketing function must be measured as a whole, to give an accurate picture of marketing performance.

Marketers must be able to select and report on those marketing indicators that monitor the overall performance of their area of responsibility. While effective marketing management requires the detailed analysis of all marketing processes, limiting reported data to essential performance indicators clarifies each situation, and prevents “information overload” at every management level.

© 2006 N.C.Watkis, Contract Marketing Service
Specialists in Measuring Marketing Performance and Return on Marketing Investment. CMC- InsightExec 21June 2006

Marketing performance should be measured by results

2006-05-16T15:20:00.001+01:00

Marketing is not just about advertising and selling, despite what people may say and write. If marketing is really about anticipating and satisfying customer demand profitably, then it encompasses a lot more than advertising and sales.

There is nothing new in business. Old knowledge is forgotten, rediscovered, and then reissued in different packaging “As new”. Measurement for management had been around for a long time since the advent of “time and motion” studies in the 1930s. Yet Marketing is the last area of business to come under “time and motion” scrutiny. Marketing people often seem to have been reluctant to have their activities measured and monitored as in the other areas of business such as finance and operations.

The general view, is that marketing is more of an art than a science, and therefore not conducive to useful measurement. Marketing, which encompasses all of “business getting” activities of a company in generating profitable revenue, requires considerable investment in money and resources, and is at the heart of every business. It is therefore not good management practice to allow marketing activities to continue without proper measurement of both the investment, and the results. If all marketing is investment, why would companies not want to assess the returns on their money?

Applying measurement and analysis to marketing activities is not something to be avoided, especially by marketers. Increasingly Chief Executives and Financial Officers are looking to ensure that measurement of the return on investment is used across the whole business area, including marketing. For marketers, Measuring Marketing Performance provides an opportunity to give quantifiable proof of the value of their contribution to the business.

A survey in late 2005 by the Chartered Institute of Marketing revealed that just 11 of the UK’s FTSE 100 companies have a Marketer on the main board. If marketing encompasses all the “business getting” activities of a company, it seems strange that it has no Board representation, alongside that of finance and operations in the majority of companies. Perhaps the reason is that Marketing is frequently perceived too narrowly in terms of advertising and sales, and lacking the quantifiable accountability of Finance and Operations, is unable to prove and justify its contribution.

The question that arises is, “Do marketers only understand the individual elements of marketing activity, rather than understanding the management of all the “business getting” activities of marketing as a whole? If Marketers are not able to quantify the contribution of marketing to a business, then their credibility as managers will be insufficient to merit membership of a Board of Directors. As Peter Drucker said, “If you can’t measure it, you can’t manage it”.

Although measurement in marketing is being talked about, it is usually limited to specific marketing activities, advertising, CRM, sales, market share etc. The new ideas of “Marketing Due Diligence,” seeks to link marketing activity with shareholder value. Nonetheless, marketing activity is for one purpose only, which is to generate profitable revenue for the business, meeting the requirements of the business plan in pursuit of the business’s strategic purpose and mission statements.

Every business comprises three elements, shareholders who supply finance, employees who do the work, and customers who supply the revenue. All three elements must be kept happy if the business is to remain in being. Thus Marketing’s responsibility must be to maximize profitable revenue by satisfying customers, and thereby providing profit for the shareholders and salaries for the employees.

Recently, while making a presentation on the case for measuring marketing performance to a regional meeting of the IOD, the question arose, “Was there any common problem in marketing Management?” My perception is that a lot of management especially in Marketing relies on assumptions rather than hard fact. Successful management requires searching questions and factual answers. Marketing in common with other areas of business continues to develop a language of its own.

This in turn encourages people to assume that others understand the terms, but frequently this is not the case. Other people may use the same terms but have a completely different understanding of the meaning. One has only to ask for the meanings of Metrics, Benchmarks and ROMI, to understand the variety of definitions which are assumed to be correct. In 2005 the American Marketing Association and Aprimo Inc. identified no less than six additional interpretations of the term ROI. What is obvious is that if Marketers are imprecise in their terms and definitions it is open to question how they can quantify the contribution of marketing with any certainty.

Marketers are getting better at measuring the performance of specific marketing activities. However, except for specialist response advertising, most advertising campaigns cannot be linked directly to specific sales. Brand awareness, market share and other measures all have a certain importance. Nevertheless, the various marketing activities are not generally independent but are mutually supporting, so that it is not usually possible to ascribe specific marketing actions to specific marketing results.

The job of the Marketing manager is to maximize profitable revenue, while minimizing the costs involved and the assets used. To achieve this, the manager must understand all the activities involved in getting and maintaining business. The manager must ask difficult and searching questions, avoid assumptions, and seek quantifiable proof of performance. The ultimate question is, “Does marketing collectively make a financial contribution to the business in terms of profitable revenue, and can the marketing manager prove that it does so cost effectively?”

© 2006 N.C.Watkis, Contract Marketing Service
Specialists in Measuring Marketing Performance and Return on Marketing Investment.

CMC- InsightExec 16 May 2006.