Business Performance Maximized software improves your marketing budget.

Business Performance Maximized

Contract Marketing Service
(marketing performance specialists)

press publications

Accounting Age

DO YOU BELIEVE THE HYPE? Love it or hate it, marketing is an essential tool for any business, writes Nicholas Watkis. But how do you assess its true value? Accountancy Age 12 May 2005:

Marketing Magnified - CMO Council Newsletter

Cut or not to cut? That is the question Feb 2010
What’s the purpose of Marketing? 10 Jan 08
Do Marketing Measurements Indicate Management Performance? Jan 2007
Marketing Performance Dashboard – Is it Overstated? October 2006

Management Consultancy

Getting value for money in marketing September 1994

InsightExec

What does Marketing contribute to the “Bottom Line”? CMC- InsightExec 01 Aug 07
If “marketing” is the generator of business revenue, why do Financial Offiers generally regard “marketing” as only a cost?CMC- InsightExec 26Jun 07
Are Marketers Suitable Managers of Marketing? CMC- InsightExec 04 Jun 07
Board Representation for Marketing requires evidence of performance CMC- InsightExec 19 Feb 07
Do Marketing Measurements Indicate Management Performance?CMC- InsightExec 10 Jan 07
Today’s Marketing Metrics Don’t Guarentee Tomorrow’s Performance CMC- InsightExec 14 Dec 06
Score cards and metrics – are they an unnecessary distraction? CMC- InsightExec 21 Nov 06
Marketing Measurements, how many Metrics? CMC- InsightExec 26 Sept 06
Nothing Succeeds Like Success CMC- InsightExec15 Aug 06
Marketing Leadership Gets Results CMC- InsightExec 20 Jul 06
Do Marketing Measurements Indicate Management Performance CMC- InsightExec 21 June 06
Marketing performance – How much information do we need? CMC- InsightExec 15 June 06
Marketing performance should be measured by results CMC - InsightExec 16 May 06
What Drives Marketing Performance CMC - InsightExec 25 Apr 06
Marketing Performance Dashboard is it overstated? – CMC- InsightExec 04 Apr. 06
How to Show the Value of Marketing CMC - InsightExec 31 Mar 06

Telegraph Business Club

What's New In Marketing

Marketing Performance Should Be Measured by Results 9 May 06

OTHER ARTICLES

Getting value for money in marketing

Management Consultancy September 1994

The marketing emphasis in recent years has been to encourage a strong focus, the development of marketing strategy and the evolution of Total Quality Marketing (TQM). These concepts, while suited to larger companies and especially those involved with fast moving consumer goods (FMCGs), do not sit easily with small and medium-sized companies, where resources are more restricted and results more apparent.

In these industrial and service businesses, margins are often tight, competition is strong and all investment must be justified by tangible results. But in these businesses marketing is often seen by management as another name for sales promotion. Strategy has limited value here, because in competitive and volatile markets, businesses are too busy trying to maintain sales and revenue and have little influence on their position beyond 12 to 18 months ahead.

Marketing requires considerable investment in time and money yet it appears to be the least accountable of business functions. It is because marketing is imprecise that a surprising number of companies are often unable to assess or define their marketing function's efficiency or effectiveness, neither can they demonstrate the return for the money and time invested.

The purpose of the marketing function is to ensure that customer demand is anticipated and satisfied profitably, and this requires effective marketing management. However, a full understanding of marketing theory does not in itself make effective management. Practical experience is a vital factor, yet even this does not guarantee success. Probably the most important factor is the ability to correctly interpret timely and accurate information; to make reasoned judgements and decisions and to initiate and implement those actions necessary to produce a desired result. To achieve this, it is essential that there should be an efficient and effective process for the continuous control and monitoring of marketing output, and the use of marketing assets and resources.

A recent article by Professor McDonald of Cranfield University in Marketing Business, states that performance measures should be applied across all marketing tasks to determine appropriate levels of spending, and the degree of "value for money". Performance implies a degree of task-specific training, skill and demonstrable accountability, and this is where marketing as a discipline is weak. Professor McDonald goes on to state that businesses are losing faith in marketing's ability to drive growth, and that the discipline has been reduced in the eyes of many to short-term holding measures and intrinsically to sales promotion and sales leads.

Marketing must "prove itself", by getting rid of the mystique and "woo 111ness". Good strategic planning and TQM will not in themselves yield results, but attitude, motivation and effective marketing management will do much to achieve quantifiable marketing results.

TQM should enable the marketing function to prove that it undertakes certain actions and policies and can demonstrate that it does so. It requires that the marketing function has a recognised schedule of procedures which form the foundation of all activities and act as a benchmark against which performance may be measured.

There are no ideals or general standards by which marketing performance may be measured. Therefore it is essential that objectives are set in relation to the industry involved and the markets served. Analysis of competitors and industry performance may indicate industry "norms" as well as high and low performance.

The assessment of marketing efficiency provides the key measure of marketing management comparing the output and contribution of the marketing function with the value of marketing investment and; the use of marketing assets. These separate elements can be combined into a measure known as the Optimum Marketing Performance. OMP is based on the maximisation of sales, the minimisation of marketing costs

and the minimisation of marketing assets used. It does not in itself guarantee the maximisation of profits as it is not a measure of company performance but of marketing performance and does not take into account factors which do not impinge on the marketing function such as loans, fixed costs, and other charges.

The marketing function must be as fully accountable as any other part of a business. Marketing practitioners must develop and implement structured marketing management controls and procedures enabling resources to be used more efficiently and performance to be measured. They must also provide bench marking to maximise the overall performance of the marketing policy and us procedure.

© N.C.Watkis, Contract Marketing Service Sep 1994
Contract Marketing Service, (Specialists in Measuring Marketing Performance and Return on Marketing Investment.)

Cut or not to cut? That is the question.

CMO Council Marketing Magnified Newsletter Feb 2010

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.

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

* * * *

What’s the purpose of Marketing?

CMO Council Marketing Magnified Newsletter 10 Jan 08

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.)

DO MARKETING MEASUREMENTS INDICATE MANAGEMENT PERFORMANCE?
CMO Council Marketing Magnified Newsletter 10 Jan 07

“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.)

Marketing Performance Dashboard – Is it Overstated?

CMO Council Marketing Magnified Newsletter October 2006

When under the chairmanship of the late Lord Weinstock, GEC was generally considered one of the most efficient British companies of the past 50 years. Before Lord Weinstock’s retirement, GEC was known for its profits and cash mountain. This position of financial strength was credited to Lord Weinstock about whom, the story goes, that it was his daily habit of asking each of his main managers how much money they had made that day.

The story may be apocryphal, but the principle is there that in having regular management reports of their business progress, the managers were reminded of their responsibility for making money for the company.

Measuring marketing performance highlights the ability of the management to convert marketing investment into profitable revenue. Thus marketing measurement provides a quantitative indicator not only of the efficiency of the marketing function, but also of the effectiveness of those individuals responsible for marketing management and generating profitable revenue.

For effective marketing management, there is no substitute for the quantitative measurement of marketing performance. After all, it was Peter Drucker who said that “If you can’t measure it, you can’t manage it.” The desire from the business world to find quantitative indicators of business performance, has led to increased interest in the “dashboard” approach, where particular business indicators are a guide to overall business performance.

This dashboard approach is now being applied to the marketing function as well as other parts of a business, but while some may see it as the key to management success, it is not the Holy Grail of management solutions, as it only provides part of the picture.
The dashBoard approach takes its name from the idea that the performance of a business can be gauged from a small number of key indicators, rather like the pilot’s blind flying panel in an aircraft. However, any pilot will tell you that the blind flying instruments indicate how the aircraft is moving; up, down, speed, height, and direction. But without a map and the ability to see outside, the aircraft can still fly into the mountain in front of it.

So it is with business and marketing. Unless the management keep their “heads up” to see what the market is doing and the business conditions in which their business operates, the marketing effort and the business may still flounder despite the marketing performance indicators showing all is well. The question is how is the marketing manager to keep “heads up” and read the map while monitoring the dashboard?

Having a continuous flow of marketing performance metrics enables the marketing manager to understand the current performance, but there is an equal requirement for a continuous input of market, economic and business environment information, so that the progress of the business may be seen in the external business context.

If for example the marketing performance indicators showed that revenue profits and customer growth were all growing at 6 percent that would show a positive management performance. If however, external information showed that the market was growing at 10 percent, then the relative performance