The Only Marketing Question the CEO cares about

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?

© N.C.Watkis, Contract Marketing Service 07 Aug 09
Contract Marketing Service, (Marketing Performance Consultants)

September 3, 2009   Posted in: marketing management

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