How Much Marketing do we need?

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.


© N.C.Watkis, Contract Marketing Service 08 May 09
Contract Marketing Service, (Marketing Performance Consultants)

May 26, 2009   Posted in: marketing management

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