There have been libraries written about strategy, and particularly marketing strategy. There are now multitudes of tools and templates available to develop and implement, but the gap between the development and successful implementation of marketing strategy is huge, and hard to navigate.
Marketing is a functional silo on an organisation chart, as is Sales, Operations, Finance, HR, but unlike the others, marketing deals with unknowns, the future, whereas all the other functions deal with the past, or what is immediately in front of them.
Marketing is about the future, long term commercial sustainability, and its effectiveness is really hard to measure, other than in hindsight. There are lots of measures for things that have happened, which are the result of often many combinations of actions taken some time ago, so the measures are unable to change anything, just give insights to what worked and what did not.
As the senior marketing person in a very large business 30 years ago, I found myself often talking about advertising, segmentation, positioning, graphic design, and all the rest, around the board table, which either put others to sleep, or elicited opinions, usually uninformed, about the detail. However, when I talked revenue I had their attention.
Marketing is all about revenue, particularly future revenue. The other stuff is the paddling under the surface that enables the generation of the revenue, but the real measure of marketing effectiveness is revenue and margins over time.
In every business I have ever had anything to do with, marketing expenditure is treated as an item in the P&L. By definition, items in the P&L are expenses or past sales revenue. This is inconsistent with the notion of marketing being about building the foundations of future revenue.
The closest analogy is a piece of capital equipment, they are always purchased to fill one of two roles, sometimes both:
- Increase the volumes available too be sold,
- Increase the productivity of the processes.
Those purchases are recorded in the journals, posted to the appropriate ledger account and reported in the cash flow statements, and the balance sheet, not the P&L. The greater irony is that capital items are depreciating assets, whereas marketing investments, when done well are appreciating assets, unrecorded anywhere except the P&L as an expense until the business is sold, when the accountants start talking about ‘Goodwill’ being the difference between the realisable value of the physical assets, and the liabilities on the books.
There is a structural paradox here. We treat a potentially appreciating asset differently to one that can only depreciate, just because it is hard to measure.
This challenge of measurement is the biggest one marketing people have to hurdle. The turnover of marketers in senior roles is the fastest amongst the functional heads in large corporations because we generally do not recognise the essential long term business building nature of marketing investments. We treat it as an expense to be cut at the slightest cloud on the profitability horizon, and the marketing people with it.
One of the challenges here is that to achieve these long term outcomes, marketing requires the co-operation and collaboration of all the other functions, without the organisational authority to direct. The CMO has to be a leader across functions. He/she has to build the respect and co-operation of other functional leaders, often at odds with their short term function specific performance measures.
25 years ago, I and my marketing team, failed to convince the board of the then Dairy Farmers Co-Operative to invest the required capital in new equipment to launch a new brand of flavoured milk. It was to be packaged in plastic bottles, with a screw cap, to be sold at a very considerable premium to the products then only available in the gable top cartons, and we proposed to sell it to different consumers. Nobody had done this before, we were banking on tapping into a market completely under-serviced by existing packaging and branding. The Operations Manager at the time believed in the project, and put his neck on the line by committing his R&M budget to refurbish some older gear in the absence of capital approval, and I ‘stole’ the required advertising funds from another brand. We launched Dare Flavoured milk, and it delivered the fastest return on investment I have ever seen, and 25 years later, it is still going strong, delivering revenue and margins to the now overseas owners of the business.
If marketers started talking about revenue generation, rather than the more common ‘marketing-speak’ like positioning, segmentation, and all the insider jargon generated by digital, they will be taken much more seriously around the board table. Building support amongst other functions to acknowledge the long term impacts of intelligent marketing, is necessary for long term prosperity, and the only real measure of marketing effectiveness.
The management task is all about getting the most out of the assets and capabilities of your business, and it is marketing management that carries the usually unarticulated responsibility to drive the collaboration necessary to achieve the best outcomes.
This task has four dimensions:
Operational management, strategic management, Financial management, and performance ,management.
Strategic management is all about the manner in which you address your market opportunities and challenges, and has a long term focus on commercial sustainability.
Operational management is the manner in which you deploy and utilise the assets of the business on a day to day basis to add value that customers are prepared to pay for.
The financial management of a business provides the basis for the assessment of success, or failure. It is a scorecard that is capable of comparison, across activities, business functions and timeframes.
Lack of a good financial management framework is a bit like walking blindfolded into a minefield, you might be lucky for a while, but eventually you get blown up.
Financial management is far more than just running the numbers, and ensuring compliance with the tax and corporate rules, it is about being in a position to make the choices that need to be made across the business every day, that shape not just today, but build the resilience necessary for commercial longevity. Understanding the numbers is a core part of every management job, not just of the financial people.
Performance management. Performance management is all about getting the most out of the assets and capabilities your business has, and can purchase in, maximising the productivity of the assets of all types you have deployed.
Manufacturing is the backbone of the economy, and is not taken sufficiently seriously by current national leadership. While we migrate to an economy whose GDP is less dependent on ‘hard’ assets, to one that emphasises ‘services’ we fail to adequately factor in the foundations that manufacturing delivers. In our age of ‘digitisation’ the value coming from increasing productivity is ill defined by the measures employed in the past. We need a new suite of measures, based on the old, but adapted to reflect the reality of a changed world. This is particularly as it is now an international race, without the protection of geography, and less of the artificial protection of regulation, despite the regular hiccups that result from populist politics, and just keeping up requires a substantial effort and investment.
