Unlocking the real value of marketing

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Of the five business deadly sins, the first and easily the most common is the worship of high profit margins

—Peter Drucker

Marketing is the most important driver of economic value creation. It is also often the largest discretionary spend in business, so how do you ensure that it really delivers? For too long, marketing has been perceived to be unaccountable, unfocused and indisciplined in connecting its creative executions with business performance.

While the outcome of marketing may seem obvious—increased sales—many a marketing director has survived and thrived on the wave of advertising that is beautiful and emotive.

Even if you do know that it has a financial impact, there is no guarantee that consumer preference will convert ultimately into stock market performance. Taking great rivals Coca-Cola and Pepsi, for example, numerous studies have shown that while more people like the taste of Pepsi, they prefer to buy the Coke brand. Similarly, despite the higher sales revenues of Pepsi worldwide, analysts and investors have more confidence in the future cash flows of Coke (or, more precisely, The Coca-Cola Company over Pepsico). Brands therefore have a significant impact on investors as well as consumers.

Measuring marketing performance through a focus on the most significant ‘metrics’ enables you to:

* demonstrate the ROI on the business’s largest discretionary spend;

* distinguish short-and long-term impacts of marketing;

* improve activities through adjustment as initial results come in;

* focus the efforts of creative and ill-disciplined marketers;

* provide a useful lead indicator of future business performance;

* improve the respect for and influence of marketers across the business;

* engage business leaders in marketing and its business impact.

Most marketers realise this, although many still do not appreciate the financial significance of getting it right. While marketers might be tempted to focus on the creativity and see measurement as a bolt-on at the end, measurement itself can make a significant and rapid impact on performance by influencing the upfront decisions—targeting, designing and prioritising actions.

Marketing and the CEO

Indeed, according to an ANA/Booz Allen Hamilton study, Marketing Department Priorities Often Differ from CEOs Agenda, marketing is considered a critical business function but the lack of actionable metrics has removed it from the CEO’s agenda. Their research indicates that 75% of senior executives agree that marketing is far more important than it was five years ago; however, most see it as increasingly disconnected from the business agenda.